Russia Retaliates at Europe's Scheme to Lend Immobilized Russian Funds to Ukraine

Kyiv remains facing a severe shortage of financial resources to maintain its armed forces and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

From the EU's perspective, the answer to plugging Ukraine's financial shortfall of €135.7bn for the next two years is found in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and Brussels seek to give it the green light at their EU leaders' conference next week.

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

'Appropriate' to Use Russia's Funds, Argue European and Ukrainian Officials

All told, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is in the custody of Euroclear.

European and Ukrainian authorities contend that that capital should be used to rebuild what Russia has laid waste to: The European Commission refers to it as a "loan for reparations" and has come up with a plan to bolster Ukraine's economy amounting to €90bn.

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

German Chancellor Friedrich Merz says the assets will "allow Ukraine to defend itself efficiently against future Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not only Moscow that is unhappy.

Belgium is concerned it will be burdened by an enormous bill if it all fails, and Euroclear head Valérie Urbain warns using the assets could "destabilise the international financial system".

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

Belgium's PM Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

Explaining the EU's Strategy?

Brussels is under pressure prior to next Thursday's summit to agree on a solution that Belgium can accept.

So far the EU has avoided touching the assets themselves directly but since last year has paid the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is considered safe as Russia is sanctioned and the returns are not Russian sovereign property.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has struggled to make up the shortfall left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU plans designed to supplying Ukraine with €90bn, to finance a majority of its funding needs.

• Option one is to borrow the funds on the markets, secured against 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 problematic when Budapest and Bratislava object to funding Ukraine's military.
• That leaves loaning Ukraine cash from the frozen Russian funds, which were originally held in securities but have now largely turned into cash. That capital is an asset of Euroclear located within the European Central Bank.

The EU's executive accepts Belgium has valid worries and says it is confident it has dealt with them.

The scheme is for Belgium to be shielded with a insurance covering all the €210bn of Russian assets in the EU.

If Euroclear incur losses of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

Should Russia took legal action against Belgium itself, any ruling by a Russian court would not be accepted in the EU.

In a significant move, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the economic security of the union" continues.

The Reasons Belgium is Still Not Convinced

Brussels is adamant it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and worries about being forced to deal with the fallout if things do not work out.

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

"The Belgian economy is not large. Belgian GDP is around €565bn – imagine if it would need to carry a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to secure adequate protections for the loan itself, Belgium fears an further exposure of being subject to extra fines or liabilities.

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

"Banks need to follow stability regulations and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do just that.

"Why do we have these financial regulations? It's because we want banks to be stable. And if things fail it would become the responsibility of Belgium to bail out Euroclear. That's another reason why it's so important for Belgium to secure absolute protections for Euroclear."

The European Union Facing Strain from Every Direction

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

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

Although Russia is adamant its money should not be touched, there are further worries among EU officials that the US may want to employ Russia's frozen billions differently, as part of its own peace initiative.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also aware the US has been engaging with Russia about possible partnership.

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