Moscow Responds at the EU's Scheme to Lend Frozen Russian Funds to Kyiv

Kyiv remains depleting its financial resources to sustain its armed forces and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the answer to addressing Kyiv's funding gap of €135.7bn for the coming 24 months rests with frozen Russian assets located within Belgian bank Euroclear, and European Union officials seek to give it the green light at their Brussels summit next week.

Russian officials state the EU plan would be an act of theft, and Moscow's monetary authority declared on Friday it was suing Euroclear in a Moscow court even before a conclusive plan is made.

'Only Fair' to Utilize Moscow's Funds, Say Ukraine and the EU

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

The EU and Ukraine maintain that that capital should be used to rebuild what Russia has devastated: The European Commission calls it a "reparations loan" and has proposed a plan to support Ukraine's economy amounting to €90bn.

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

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

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

The Belgian government is concerned it will be saddled with an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "disrupt the international financial system".

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

The leader of Belgium Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "carries significant risks" for his country.

What is the EU's Proposal?

The EU is racing against time before next Thursday's summit to come up with a solution that Belgium can agree to.

Previously the EU has refrained from using the frozen capital directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is seen as less risky as Russia is under sanction and the earnings are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to compensate for the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to providing Ukraine with €90bn, to finance a large portion of its budgetary necessities.

• One is to secure the capital on capital markets, backed by the EU budget as a guarantee. This is Belgium's preferred option but it requires a unanimous vote by EU leaders and that would be difficult when two member states oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the frozen Russian funds, which were originally held in bonds but have now largely matured into cash. That capital is an asset of Euroclear located within the European Central Bank.

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

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

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

If Russia targeted Belgium itself, any ruling by a Russian court would not be recognized 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 unanimously every six months to renew the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Still Not Satisfied

Brussels is firm it remains a staunch ally of Ukraine, but perceives regulatory pitfalls in the plan and is concerned about being left to handle the fallout if things go wrong.

A typically partisan political environment in this case has united behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

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

While the EU might be able to obtain adequate guarantees for the loan itself, Belgium fears an additional danger of being exposed to extra fines or liabilities.

Prof Colaert also argues the demand for Euroclear to grant a loan to the EU would violate EU banking regulations.

"Banks need to follow stability regulations and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things turn sour it would become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so crucial for Belgium to obtain ironclad protections for Euroclear."

The European Union Facing Strain from All Sides

Time is of the essence, warn several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "a economically realistic and politically achievable solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, 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 used, there are further worries among European figures that the US may want to use Russia's frozen billions differently, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is in discussions with Europe and the US on a rebuilding 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 suggested $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving