Moscow Responds at Europe's Scheme to Loan Frozen Russian Funds to Kyiv

Kyiv remains depleting its funding to sustain its armed forces and economy, after nearly four years of full-scale conflict with Russia.

From the EU's perspective, the answer to addressing Kyiv's budget hole of €135.7bn for the following biennium lies in Moscow's immobilized funds located within Belgian bank Euroclear, and EU leaders aim to finalize the plan at their meeting in Brussels next week.

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

'Just' to Use Russia's Funds, Say Kyiv and Brussels

All told, Russia has about €210bn of its state reserves blocked in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities maintain that money should be used to rebuild what Russia has destroyed: Brussels terms it a "reconstruction loan" and has devised a plan to support Ukraine's economy valued at €90bn.

"It's only fair that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that those funds then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

Chancellor Friedrich Merz argues the assets will "enable Ukraine to defend itself successfully against subsequent Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is unhappy.

Belgium is concerned it will be burdened by an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "undermine the international financial system".

Euroclear also has an estimated €16-17bn frozen in Russia.

The leader of Belgium Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will accept the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

What is the EU's Plan?

The EU is working to the wire before next Thursday's summit to agree on a solution that Belgium can accept.

Until now the EU has held off using the frozen capital directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the profits is considered permissible as Russia is under sanction and the returns are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to cover the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals seeking to supplying Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• The first is to raise the money on the markets, guaranteed by the EU budget as a surety. This is Belgium's favored solution but it demands a agreement by all by EU leaders and that would be problematic when Budapest and Bratislava object to funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Moscow's immobilized capital, which were at first held in bonds but have now largely turned into cash. That funding is an asset of Euroclear held in the European Central Bank.

The EU's executive acknowledges Belgium has legitimate concerns and claims it is convinced it has dealt with them.

The scheme is for Belgium to be shielded with a guarantee covering all the €210bn of Russian assets in the EU.

Should Euroclear face a financial hit of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

Should Russia went after Belgium itself, any judgment by a Russian court would not be enforced in the EU.

In a significant move, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe permanently.

Until now they have had to vote unanimously every six months to extend the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Still Not Satisfied

Brussels is insistent it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and worries about being shouldering the consequences if things fail.

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

"Belgium is a small economy. Belgian GDP is approximately €565bn – imagine if it would need to carry a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to arrange sufficient assurances for the loan itself, Belgium is concerned about an added risk of being exposed to extra legal costs.

Prof Colaert also believes the stipulation for Euroclear to provide a loan to the EU would violate EU banking regulations.

"Lenders need to follow prudential rules and shouldn't concentrate risk. Now the EU is asking Euroclear to do exactly that.

"What is the purpose of these bank rules? It's because we want banks to be solvent. And if things turn sour it would fall to Belgium to bail out Euroclear. That's an additional reason why it's so vital for Belgium to get water-tight protections for Euroclear."

The European Union Facing Strain from All Sides

There is no time to lose, state seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a fiscally viable and politically achievable solution".

"It is a decisive moment for us," states leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do afterwards. That's why we have to finalize the deal in a week's time".

Although Russia is adamant its money should not be accessed, there are additional apprehensions among European figures that the US may want to use Russia's blocked funds in another way, as part of its own peace plan.

Zelensky has stated Ukraine is in discussions with Europe and the US on a recovery fund, but he is also aware the US has been talking to Russia about potential collaboration.

An early draft of the US peace plan suggested $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving