Moscow Hits Back at the EU's Scheme to Lend Immobilized Moscow's Funds to Kyiv

Kyiv remains facing a severe shortage of financial resources to sustain its armed forces and economy, after almost four years of the ongoing invasion by Moscow.

In the view of European leaders, the remedy to plugging Ukraine's budget hole of €135.7bn for the following biennium rests with Moscow's immobilized funds held by Belgian bank Euroclear, and European Union officials aim to sign that off at their Brussels summit next week.

Russian officials state the EU plan would be an act of theft, and Moscow's monetary authority announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a definitive agreement is made.

'Only Fair' to Use Moscow's Funds, Say Kyiv and Brussels

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

European and Ukrainian authorities argue 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 amounting to €90bn.

"It is appropriate that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that money then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "help Ukraine to protect itself successfully against future Russian attacks".

The legal move by Moscow was foreseen in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is anxious it will be burdened by an huge bill if it all fails, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the global financial architecture".

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

Belgium's PM Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has left open the possibility of legal action if it "presents significant risks" for his country.

The Details of the EU's Proposal?

European Union officials is working to the wire before next Thursday's summit to finalize a solution that Belgium can accept.

Previously the EU has held off accessing the frozen capital directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the interest is seen as permissible as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has found it difficult to cover the gap caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU options aimed at providing Ukraine with €90bn, to pay for two-thirds of its funding needs.

• The first is to raise the money on financial markets, guaranteed by the EU budget as a surety. This is Belgium's preferred option but it requires a agreement by all by EU leaders and that would be difficult when Hungary and Slovakia are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the frozen Russian funds, which were at first held in bonds but have now predominantly turned into cash. That capital is owned by Euroclear held in the European Central Bank.

Brussels' executive arm recognizes Belgium has justified fears and states it is confident it has addressed them.

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

If Euroclear suffer a loss 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 took legal action against Belgium itself, any decision by a Russian court would not be enforced in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the economic interests of the union" continues.

The Reasons Belgium is Not Yet Satisfied

The Belgian government is firm it remains a committed partner of Ukraine, but perceives legal risks in the plan and fears being forced to deal with the fallout if things fail.

A normally fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"The Belgian economy is not large. 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 enough guarantees for the loan itself, Belgium worries about an added risk of being vulnerable to extra legal costs.

Prof Colaert also contends the requirement for Euroclear to issue credit to the EU would breach EU banking regulations.

"Financial institutions need to follow prudential rules and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be secure. And if things turn sour it would become the responsibility of Belgium to save Euroclear. That's a further cause why it's so crucial for Belgium to get ironclad guarantees for Euroclear."

The European Union Facing Strain from Every Direction

There is no time to lose, state seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "a financially feasible and politically realistic solution".

"It is a decisive moment for us," states 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 reach an agreement in a week's time".

Although Russia is unyielding its money should not be used, there are additional apprehensions among European figures that the US may want to employ Russia's blocked funds differently, as part of its own peace initiative.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also aware the US has been engaging with Russia about future co-operation.

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