Russia Responds at the EU's Proposal to Lend Frozen Russian Cash to Kyiv

Kyiv remains facing a severe shortage of funding to keep going its military and economy, after nearly four years of the ongoing invasion by Moscow.

From the EU's perspective, the solution to filling Kyiv's budget hole of €135.7bn for the coming 24 months lies in frozen Russian assets sitting in Belgian bank Euroclear, and Brussels seek to finalize the plan at their EU leaders' conference next week.

Authorities in Russia state the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was taking to court Euroclear in a Moscow court even before a definitive agreement is made.

'Appropriate' to Employ Russia's Assets, Argue European and Ukrainian Officials

All told, Russia has roughly €210bn of its funds immobilized in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine maintain that those funds should be used to reconstruct what Russia has destroyed: EU officials terms it a "reconstruction loan" and has proposed a plan to support Ukraine's economy amounting to €90bn.

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

Chancellor Friedrich Merz states the assets will "help Ukraine to protect itself effectively against subsequent Russian attacks".

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

The Belgian government is concerned it will be saddled with an massive bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "destabilise the global financial architecture".

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

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

What is the EU's Plan?

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

Until now the EU has held off accessing the assets themselves directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is considered permissible as Russia is under sanction and the earnings are not Moscow's sovereign assets.

But global military support for Ukraine has declined sharply in 2025, and Europe has struggled to compensate for the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU options seeking to furnishing Ukraine with €90bn, to pay for a large portion of its funding needs.

• One is to secure the capital on capital markets, backed by the EU budget as a surety. This is Belgium's favored solution but it requires a agreement by all by EU leaders and that would be challenging when Hungary and Slovakia are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Russian assets, which were originally held in securities but have now largely been converted into cash. That money is an asset of Euroclear located within the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and says it is confident it has addressed them.

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

If Euroclear incur losses 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 took legal action against 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 for the foreseeable future.

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

The EU ambassadors are set 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 On Board

The Belgian government is firm it remains a committed partner of Ukraine, but identifies legal risks in the plan and worries about being forced to deal with the consequences if things go wrong.

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

"The Belgian economy is not large. Belgian GDP is about €565bn – consider if it would need to shoulder a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to secure sufficient guarantees for the loan itself, Belgium fears an further exposure of being exposed to extra damages or penalties.

Prof Colaert also believes the demand for Euroclear to provide a loan to the EU would contravene EU banking regulations.

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

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things turn sour it would fall to Belgium to save Euroclear. That's a further cause why it's so vital for Belgium to get water-tight assurances for Euroclear."

EU Leaders In a Difficult Position from Every Direction

The situation is urgent, caution seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "a financially feasible and politically realistic 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 afterwards. That's why we have to reach an agreement in a week's time".

Although Russia is unyielding its money should not be used, there are added concerns among European figures that the US may want to employ Russia's immobilized billions differently, as part of its own diplomatic proposal.

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

An initial document of the US peace plan mentioned $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving