Russia Hits Back at Europe's Proposal to Lend Immobilized Russian Funds to Ukraine

Ukraine is running out of cash to maintain its armed forces and economy, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the remedy to addressing Ukraine's financial shortfall of €135.7bn for the next two years is found in frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders seek to finalize the plan at their Brussels summit next week.

Russian officials warn the EU plan would be an act of theft, and the Central Bank of Russia announced on Friday it was suing Euroclear in a Moscow court ahead of a definitive agreement is made.

'Just' to Use Russia's Funds, Argue Ukraine and the EU

Overall, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is held by Euroclear.

Brussels and Kyiv contend that money should be used to reconstruct what Russia has devastated: Brussels terms it a "reconstruction loan" and has come up with a plan to bolster Ukraine's economy valued at €90bn.

"It is only just that Russia's frozen assets should be used to rebuild what Russia has destroyed – and that those funds then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "allow Ukraine to defend itself successfully against future Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not just Moscow that is dissatisfied.

Belgium is anxious it will be saddled with an massive bill if it all goes wrong, and Euroclear head Valérie Urbain says using the assets could "destabilise the world's financial order".

Euroclear also has an roughly €16-17bn locked in Russia.

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

The Details of the EU's Plan?

European Union officials is under pressure before next Thursday's summit to agree on a compromise that Belgium can agree to.

So far the EU has refrained from using the frozen capital directly but starting in 2024 has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the interest is seen as safe as Russia is under sanction and the returns are not Moscow's sovereign assets.

But global military support for Ukraine has declined sharply in 2025, and Europe has struggled to cover the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals designed to furnishing Ukraine with €90bn, to finance a majority of its financial requirements.

• One is to secure the capital on capital markets, backed by the EU budget as a guarantee. This is Belgium's preferred option but it demands a agreement by all by EU leaders and that would be problematic when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is lending Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now mostly matured into cash. That money is Euroclear property located within the European Central Bank.

Brussels' executive arm acknowledges Belgium has valid worries and states it is assured it has dealt with them.

The proposal is for Belgium to be safeguarded with a insurance encompassing all the €210bn of Russian assets in the EU.

Should Euroclear suffer a loss of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own settlement agency which are in the EU.

In the event that Russia targeted Belgium itself, any ruling by a Russian court would not be enforced in the EU.

In a significant move, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote by consensus every six months to continue the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are set to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "immediate threat to the financial well-being of the union" continues.

Why Belgium is Remains Convinced

The Belgian government is adamant it remains a strong supporter of Ukraine, but sees legal risks in the plan and is concerned about being shouldering the repercussions if things fail.

A typically fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – imagine if it would need to shoulder a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to arrange enough protections for the loan itself, Belgium is concerned about an added risk of being exposed to extra damages or penalties.

Prof Colaert also argues the stipulation for Euroclear to grant a loan to the EU would contravene EU banking regulations.

"Banks need to comply with stability regulations and shouldn't concentrate risk. Now the EU is instructing Euroclear to do precisely that.

"Why do we have these financial regulations? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to save Euroclear. That's an additional reason why it's so important for Belgium to obtain absolute protections for Euroclear."

The European Union Facing Strain from Multiple Fronts

Time is of the essence, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the financially feasible and politically realistic solution".

"This is a crucial test for us," says leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do subsequently. That's why we have to succeed in a week's time".

Although Russia is adamant its money should not be used, there are additional apprehensions among leaders in Europe that the US may want to use Russia's immobilized billions differently, as part of its own peace plan.

Zelensky has stated Ukraine is working with Europe and the US on a recovery fund, but he is also aware the US has been talking to Russia about possible partnership.

An initial document of the US peace plan mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving