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

Kyiv remains running out of financial resources to maintain its military and economy afloat, after close to 48 months of Russia's full-scale war.

In the view of European leaders, the answer to filling Kyiv's funding gap of €135.7bn for the following biennium rests with frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders hope to finalize the plan at their EU leaders' conference next week.

Authorities in Russia state the EU plan would be an illegal seizure, and Moscow's monetary authority stated on Friday it was taking to court Euroclear in a Moscow court prior to a conclusive plan is made.

'Appropriate' to Employ Russia's Funds, Argue European and Ukrainian Officials

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

Brussels and Kyiv argue that that capital should be used to rebuild what Russia has destroyed: EU officials refers to it as a "loan for reparations" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

"It is appropriate that Russia's frozen assets should be used to rebuild what Russia has destroyed – and that that capital then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz argues the assets will "allow Ukraine to shield itself efficiently against subsequent Russian attacks".

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

The Belgian government is worried it will be burdened by an enormous bill if it all backfires, and Euroclear head Valérie Urbain warns using the assets could "disrupt the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

The Details of the EU's Plan?

The EU is racing against time before next Thursday's summit to finalize a arrangement that Belgium can agree to.

Until now the EU has held off using the principal funds directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the interest is seen as permissible as Russia is subject to sanctions and the proceeds are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to compensate for the shortfall resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU options designed to supplying Ukraine with €90bn, to cover a large portion of its funding needs.

• One is to borrow the funds on capital 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 challenging when two member states oppose funding Ukraine's military.
• That leaves loaning Ukraine cash from the Russian assets, which were initially held in securities but have now largely matured into cash. That funding is Euroclear property located within the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and states it is convinced it has resolved them.

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

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

In the event that Russia went after Belgium itself, any judgment by a Russian court would not be accepted in the EU.

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

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

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the financial well-being of the union" continues.

Why Belgium is Not Yet On Board

Belgium is adamant it remains a staunch ally of Ukraine, but sees regulatory pitfalls in the plan and worries about being left to handle the consequences if things fail.

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

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – think about 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 adequate guarantees for the loan itself, Belgium worries about an further exposure of being vulnerable to extra fines or liabilities.

Prof Colaert also believes the demand for Euroclear to issue credit to the EU would breach EU banking regulations.

"Banks need to comply with prudential rules and shouldn't make one enormous loan. Now the EU is telling 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 be up to Belgium to save Euroclear. That's an additional reason why it's so crucial for Belgium to secure ironclad guarantees for Euroclear."

EU Leaders In a Difficult Position from Every Direction

Time is of the essence, warn a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "a financially feasible and practically possible solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do next. That's why we have to finalize the deal in a week's time".

Although Russia is adamant its money should not be touched, there are further worries among EU officials that the US may want to employ Russia's frozen billions differently, as part of its own peace plan.

Zelensky has stated Ukraine is working with Europe and the US on a rebuilding fund, but he is also aware the US has been holding discussions with Russia about future co-operation.

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