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

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

In the view of European leaders, the answer to plugging Kyiv's funding gap of €135.7bn for the coming 24 months is found in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and Brussels aim to give it the green light at their Brussels summit next week.

Russian officials caution the EU plan would be an act of theft, and Russia's central bank declared on Friday it was suing Euroclear in a Moscow court even before a definitive agreement is made.

'Appropriate' to Use Russia's Assets, Assert Kyiv and Brussels

Overall, Russia has approximately €210bn of its state reserves immobilized in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv argue that those funds should be used to reconstruct what Russia has laid waste to: The European Commission terms it a "reconstruction loan" and has come up with a plan to support Ukraine's economy amounting to €90bn.

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

Germany's leader Friedrich Merz states the assets will "allow Ukraine to protect itself effectively against any future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is concerned.

The Belgian government is concerned it will be left with an huge bill if it all backfires, and Euroclear head Valérie Urbain argues using the assets could "undermine the international financial system".

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

Belgian Prime Minister Bart de Wever has set the EU 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 "poses significant risks" for his country.

The Details of the EU's Plan?

Brussels is working to the wire before next Thursday's summit to agree on a compromise that Belgium can support.

Until now the EU has avoided touching the principal funds directly but starting in 2024 has transferred the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the revenue is seen as less risky as Russia is under sanction and the proceeds are not Russian sovereign property.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to compensate for the shortfall left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU proposals seeking to furnishing Ukraine with €90bn, to finance two-thirds of its financial requirements.

• The first is to raise the money on the markets, guaranteed by the EU budget as a guarantee. This is Belgium's preferred option but it requires a consensus by EU leaders and that would be problematic when two member states object to funding Ukraine's military.
• The alternative is lending Ukraine cash from the frozen Russian funds, which were initially held in bonds but have now mostly matured into cash. That capital is Euroclear property located within the European Central Bank.

Brussels' executive arm acknowledges Belgium has legitimate concerns and claims it is assured it has dealt with them.

The proposal is for Belgium to be shielded with a guarantee applying to 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.

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

As an important step, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote unanimously every six months to continue the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Still Not Satisfied

The Belgian government is firm it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and worries about being forced to deal with the repercussions if things go wrong.

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

"Belgium is a small economy. Belgian GDP is about €565bn – consider if it would need to shoulder a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to secure sufficient protections for the loan itself, Belgium is concerned about an additional danger of being exposed to extra damages or penalties.

Prof Colaert also contends the stipulation for Euroclear to provide a loan to the EU would breach EU banking regulations.

"Financial institutions need to comply with prudential rules and shouldn't concentrate risk. Now the EU is asking Euroclear to do precisely that.

"Why do we have these financial regulations? It's because we want banks to be stable. 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 secure ironclad assurances for Euroclear."

Europe Facing Strain from Multiple Fronts

Time is of the essence, warn a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the financially feasible and politically achievable solution".

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

Although Russia is unyielding its money should not be touched, there are additional apprehensions among European figures that the US may want to deploy Russia's frozen billions differently, 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 mindful the US has been engaging with Russia about potential collaboration.

A preliminary version of the US peace plan referred to $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving