Russia Retaliates at the EU's Scheme to Lend Frozen Russian Funds to Ukraine

Kyiv remains facing a severe shortage of funding to maintain its military and economy afloat, after nearly four years of Russia's full-scale war.

From the EU's perspective, the remedy to plugging Ukraine's funding gap of €135.7bn for the coming 24 months lies in Moscow's immobilized funds held by Belgian bank Euroclear, and EU leaders aim to finalize the plan at their Brussels summit next week.

Authorities in Russia caution the EU plan would be an confiscation, and Russia's central bank announced on Friday it was taking to court Euroclear in a Moscow court even before a conclusive plan is made.

'Only Fair' to Employ Russia's Assets, Assert Ukraine and the EU

Overall, Russia has roughly €210bn of its assets blocked in the EU, and €185bn of that is in the custody of Euroclear.

The EU and Ukraine argue that those funds should be used to reconstruct what Russia has laid waste to: Brussels terms it a "loan for reparations" and has come up with a plan to prop up Ukraine's economy to the tune of €90bn.

"It's only fair that Moscow's blocked funds should be used to reconstruct what Russia has destroyed – and that money then becomes Ukraine's," says Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "allow Ukraine to protect itself successfully against any future Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not just Moscow that is dissatisfied.

Authorities in Brussels is anxious it will be left with an huge bill if it all fails, and Euroclear CEO Valérie Urbain says using the assets could "disrupt the international financial system".

Euroclear also has an roughly €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 refused to rule out legal action if it "poses significant risks" for his country.

What is the EU's Strategy?

The EU is racing against time ahead of next Thursday's summit to finalize a solution that Belgium can support.

Previously the EU has avoided accessing the frozen capital directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the interest is deemed permissible as Russia is under sanction and the returns are not Russian sovereign property.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the shortfall caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU options designed to furnishing Ukraine with €90bn, to cover a majority of its budgetary necessities.

• The first is to secure the capital on capital markets, backed by the EU budget as a collateral. This is Belgium's first choice but it needs a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now largely matured into cash. That funding is Euroclear property deposited at the European Central Bank.

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

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

Should 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.

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

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

Heretofore they have had to vote by consensus 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 stay blocked as long as an "clear risk to the financial well-being of the union" continues.

Why Belgium is Still Not On Board

The Belgian government is firm it remains a strong supporter of Ukraine, but perceives legal risks in the plan and worries about being left to handle the fallout if things go wrong.

A typically fractured political scene 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 around €565bn – consider if it would need to carry a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to obtain adequate assurances for the loan itself, Belgium worries about an added risk of being vulnerable to extra fines or liabilities.

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

"Lenders need to adhere to capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is asking 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 fall to Belgium to bail out Euroclear. That's an additional reason why it's so vital for Belgium to secure water-tight protections for Euroclear."

The European Union Facing Strain from Multiple Fronts

Time is of the essence, caution several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the most financially feasible and practically possible solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to succeed in a week's time".

Although Russia is unyielding its money should not be accessed, there are additional apprehensions among leaders in Europe that the US may want to deploy Russia's immobilized billions differently, as part of its own peace initiative.

Zelensky has stated Ukraine is coordinating 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 initial document of the US peace plan mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving