Russia Retaliates at the EU's Proposal to Lend Frozen Russian Assets to Kyiv

Ukraine is facing a severe shortage of cash to sustain its armed forces and economy afloat, after nearly four years of full-scale conflict with Russia.

In the view of European leaders, the solution to filling Ukraine's budget hole of €135.7bn for the next two years lies in frozen Russian assets sitting in Belgian bank Euroclear, and European Union officials hope to sign that off at their meeting in Brussels next week.

Moscow's representatives caution the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court even before a final decision is made.

'Appropriate' to Employ Moscow's Assets, Say Ukraine and the EU

In total, Russia has about €210bn of its state reserves immobilized in the EU, and €185bn of that is in the custody of Euroclear.

European and Ukrainian authorities argue that that capital should be used to reconstruct what Russia has devastated: Brussels refers to it as a "loan for reparations" and has devised a plan to support Ukraine's economy amounting to €90bn.

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

Chancellor Friedrich Merz says the assets will "help Ukraine to protect itself successfully against any future Russian attacks".

Russia's court action was foreseen in Brussels. But it is not just Moscow that is dissatisfied.

Belgium is anxious it will be burdened by an enormous bill if it all fails, and Euroclear CEO Valérie Urbain says using the assets could "disrupt the international financial system".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

The Details of the EU's Strategy?

European Union officials is working to the wire before next Thursday's summit to come up with a arrangement that Belgium can support.

Previously the EU has held off using the assets themselves directly but for the past year has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the interest is seen as less risky as Russia is sanctioned and the returns are not property of the Russian state.

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

There are presently two EU plans aimed at furnishing Ukraine with €90bn, to pay for two-thirds of its funding needs.

• Option one is to borrow the funds on capital markets, guaranteed by the EU budget as a guarantee. This is Belgium's first choice but it requires a agreement by all by EU leaders and that would be challenging when two member states are against funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Russian assets, which were at first held in bonds but have now mostly turned into cash. That capital is Euroclear property held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has justified fears and claims it is assured it has resolved them.

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

Should Euroclear incur losses of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

Should Russia went after Belgium itself, any ruling by a Russian court would not be recognized 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 permanently.

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

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic interests of the union" continues.

Why Belgium is Still Not Convinced

Brussels is adamant it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and fears being forced to deal with the fallout if things fail.

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

"Belgium is a small economy. Belgian GDP is about €565bn – imagine if it would need to bear a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to arrange enough guarantees for the loan itself, Belgium fears an added risk of being vulnerable to extra fines or liabilities.

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

"Lenders need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. 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 solvent. And if things fail it would fall to Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to get water-tight protections for Euroclear."

Europe Under Pressure from Every Direction

There is no time to lose, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "the most financially feasible and practically possible solution".

"This is a crucial test for us," warns 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".

While Russia is insistent its money should not be touched, there are added concerns among European figures that the US may want to employ Russia's blocked funds in another way, as part of its own peace plan.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also cognizant the US has been talking to Russia about potential collaboration.

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