Russia Retaliates at the EU's Scheme to Lend Immobilized Russian Assets to Kyiv

Kyiv remains depleting its financial resources to keep going its military and economy afloat, after nearly four years of full-scale conflict with Russia.

From the EU's perspective, the remedy to addressing Ukraine's funding gap of €135.7bn for the next two years rests with assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and Brussels hope to give it the green light at their meeting in Brussels next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and the Central Bank of Russia announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a definitive agreement is made.

'Appropriate' to Utilize Moscow's Funds, Assert European and Ukrainian Officials

In total, Russia has approximately €210bn of its assets frozen in the EU, and €185bn of that is managed by Euroclear.

The EU and Ukraine maintain that those funds should be used to restore what Russia has destroyed: The European Commission refers to it as a "reparations loan" and has devised a plan to prop up Ukraine's economy valued at €90bn.

"It is only just that Moscow's blocked funds should be used to reconstruct what Russia has devastated – and that money then becomes Ukraine's," remarks Ukraine's Volodymyr Zelensky.

Chancellor Friedrich Merz states the assets will "help Ukraine to defend itself effectively against subsequent Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not only Moscow that is concerned.

Belgium is concerned it will be saddled with an enormous bill if it all backfires, and Euroclear CEO Valérie Urbain argues using the assets could "disrupt the world's financial order".

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

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has left open the possibility of legal action if it "carries significant risks" for his country.

Explaining the EU's Plan?

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

So far the EU has refrained from accessing the frozen capital directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the interest is considered permissible as Russia is under sanction and the proceeds are not property of the Russian state.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to make up the shortfall caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU options aimed at providing Ukraine with €90bn, to pay for a large portion of its funding needs.

• One is to borrow the funds on the markets, secured against the EU budget as a guarantee. This is Belgium's favored solution but it requires a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the frozen Russian funds, which were originally held in securities but have now predominantly turned into cash. That money is an asset of Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has legitimate concerns and states it is confident it has addressed them.

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

If Euroclear face a financial hit 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.

If Russia took legal action against Belgium itself, any judgment by a Russian court would not be enforced in the EU.

In a key development, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Not Yet On Board

The Belgian government is adamant it remains a staunch ally of Ukraine, but perceives legal risks in the plan and worries about being forced to deal with the consequences if things fail.

A typically fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from other European officials.

"The Belgian economy is not large. Belgian GDP is around €565bn – think about if it would need to bear a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to obtain enough protections for the loan itself, Belgium is concerned about an further exposure of being exposed to extra damages or penalties.

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

"Financial institutions need to adhere to stability regulations and shouldn't make one enormous loan. 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 stable. And if things fail it would fall to Belgium to save Euroclear. That's another reason why it's so important for Belgium to secure water-tight protections for Euroclear."

The European Union In a Difficult Position from Every Direction

The situation is urgent, state seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the most fiscally viable and politically achievable solution".

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

Although Russia is adamant its money should not be used, there are further worries among EU officials that the US may want to use Russia's immobilized billions in another way, as part of its own peace plan.

Zelensky has stated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also mindful the US has been talking to Russia about future co-operation.

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