Russia Retaliates at Europe's Proposal to Loan Immobilized Russian Assets to Kyiv

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

From the EU's perspective, the remedy to addressing Kyiv's financial shortfall of €135.7bn for the following biennium is found in Moscow's immobilized funds sitting in Belgian bank Euroclear, and Brussels hope to finalize the plan at their EU leaders' conference next week.

Moscow's representatives state the EU plan would be an illegal seizure, and the Central Bank of Russia stated on Friday it was taking to court Euroclear in a Moscow court even before a final decision is made.

'Appropriate' to Utilize Moscow's Funds, Assert Ukraine and the EU

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

The EU and Ukraine maintain that money should be used to reconstruct what Russia has destroyed: EU officials terms it a "loan for reparations" and has devised a plan to support Ukraine's economy valued at €90bn.

"It is appropriate that the assets frozen from Russia should be used to reconstruct what Russia has devastated – and that those funds then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

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

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

Authorities in Brussels is worried it will be left with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "destabilise the international financial system".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

Explaining the EU's Strategy?

European Union officials is under pressure prior to next Thursday's summit to agree on a solution that Belgium can accept.

Until now the EU has refrained from touching the assets themselves directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the interest is deemed less risky as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has struggled to cover the gap caused by the US decision to largely cease funding Ukraine under President Donald Trump.

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

• Option one is to secure the capital on capital markets, secured against the EU budget as a guarantee. This is Belgium's first choice but it demands a consensus by EU leaders and that would be difficult when Budapest and Bratislava oppose funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Russian assets, which were initially held in bonds but have now largely been converted into cash. That funding is Euroclear property deposited at the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and states it is assured it has dealt with them.

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

Should Euroclear incur losses 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.

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

In a significant move, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the economic security of the union" continues.

The Reasons Belgium is Still Not Convinced

The Belgian government is insistent it remains a committed partner of Ukraine, but sees legal risks in the plan and is concerned about being shouldering the repercussions if things fail.

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

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – imagine if it would need to shoulder a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to secure sufficient assurances 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 violate EU banking regulations.

"Financial institutions need to adhere to capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is telling Euroclear to do exactly that.

"Why do we have these financial regulations? It's because we want banks to be solvent. And if things turn sour it would become the responsibility of Belgium to bail out Euroclear. That's another reason why it's so important for Belgium to get absolute assurances for Euroclear."

The European Union Under Pressure from Multiple Fronts

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

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do afterwards. That's why we have to reach an agreement in a week's time".

While Russia is adamant its money should not be used, there are added concerns among EU officials that the US may want to use Russia's blocked funds for another purpose, as part of its own peace initiative.

Zelensky has said Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also aware the US has been holding discussions with Russia about potential collaboration.

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