Russia Retaliates at Europe's Proposal to Loan Frozen Russian Cash to Kyiv

Ukraine is running out of cash to sustain its armed forces and economy, after almost four years of Russia's full-scale war.

For Europe, the remedy to addressing Kyiv's financial shortfall of €135.7bn for the following biennium lies in frozen Russian assets located within Belgian bank Euroclear, and Brussels seek to give it the green light at their meeting in Brussels next week.

Authorities in Russia state the EU plan would be an act of theft, and Moscow's monetary authority announced on Friday it was suing Euroclear in a Moscow court ahead of a conclusive plan is made.

'Just' to Employ Russia's Funds, Assert European and Ukrainian Officials

In total, Russia has approximately €210bn of its assets blocked in the EU, and €185bn of that is managed by Euroclear.

The EU and Ukraine argue that money should be used to rebuild what Russia has devastated: The European Commission calls it a "reconstruction loan" and has devised a plan to bolster Ukraine's economy valued at €90bn.

"It is appropriate that Russia's frozen assets should be used to rebuild what Russia has devastated – and that that capital then becomes ours," remarks Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "allow Ukraine to protect itself successfully against subsequent Russian attacks".

Russia's court action was anticipated in Brussels. But it is not just Moscow that is concerned.

Belgium is anxious it will be saddled with an enormous bill if it all goes wrong, and Euroclear head Valérie Urbain says using the assets could "undermine the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

The EU is racing against time prior to next Thursday's summit to come up with a compromise that Belgium can support.

Previously the EU has refrained from touching the assets themselves directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is considered permissible as Russia is subject to sanctions and the proceeds are not property of the Russian state.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU options designed to providing Ukraine with €90bn, to pay for two-thirds of its funding needs.

• Option one is to borrow the funds on the markets, backed by the EU budget as a guarantee. This is Belgium's favored solution but it requires a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia object to funding Ukraine's military.
• This makes the other option lending Ukraine cash from the frozen Russian funds, which were originally held in securities but have now largely matured into cash. That money is owned by Euroclear held in the European Central Bank.

The European Commission acknowledges Belgium has valid worries and says it is assured it has addressed them.

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

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

Should Russia went after Belgium itself, any judgment by a Russian court would not be accepted in the EU.

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

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

The EU ambassadors are set to use an special provision 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 Remains Satisfied

Brussels is insistent it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and fears being forced to deal with the repercussions if things go wrong.

A usually partisan political environment in this case has united behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

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

While the EU might be able to secure sufficient protections for the loan itself, Belgium worries about an further exposure of being exposed to extra damages or penalties.

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

"Financial institutions need to adhere to stability regulations and shouldn't make one enormous loan. Now the EU is asking Euroclear to do just that.

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things go wrong it would be up to Belgium to bail out Euroclear. That's an additional reason why it's so vital for Belgium to obtain ironclad assurances for Euroclear."

EU Leaders Under Pressure from Every Direction

There is no time to lose, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the most financially feasible and practically possible solution".

"This is a crucial test for us," says 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 accessed, there are further worries among EU officials that the US may want to deploy Russia's blocked funds differently, as part of its own peace plan.

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

An initial document of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving