Moscow Responds at Europe's Scheme to Lend Frozen Russian Funds to Kyiv

Ukraine is facing a severe shortage of cash to sustain its armed forces and economy, after almost four years of full-scale conflict with Russia.

From the EU's perspective, the remedy to filling Ukraine's financial shortfall of €135.7bn for the following biennium is found in frozen Russian assets located within Belgian bank Euroclear, and European Union officials aim to give it the green light at their Brussels summit next week.

Russian officials warn 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 prior to a final decision is made.

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

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

Brussels and Kyiv maintain that that capital should be used to rebuild what Russia has destroyed: The European Commission terms it a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy to the tune of €90bn.

"It is appropriate that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that money then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

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

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

The Belgian government is anxious it will be left with an massive bill if it all fails, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the global financial architecture".

Euroclear also has an roughly €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 "presents significant risks" for his country.

What is the EU's Plan?

European Union officials is working to the wire before next Thursday's summit to come up with a solution that Belgium can accept.

Previously the EU has held off accessing the assets themselves directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the interest is deemed safe as Russia is sanctioned and the returns are not property of the Russian state.

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

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

• The first is to raise the money on capital markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it demands a consensus by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is lending Ukraine cash from the Russian assets, which were at first held in bonds but have now predominantly turned into cash. That funding is Euroclear property held in the European Central Bank.

The European Commission recognizes Belgium has legitimate concerns and states it is assured it has addressed them.

The scheme is for Belgium to be protected 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 settlement agency which are in the EU.

Should Russia targeted Belgium itself, any decision by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

Previously 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 set to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the financial well-being of the union" continues.

Why Belgium is Not Yet On Board

Brussels is firm it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and fears being shouldering the consequences if things fail.

A normally divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from other European officials.

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

While the EU might be able to arrange sufficient protections for the loan itself, Belgium worries about an further exposure of being subject to extra legal costs.

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

"Banks need to follow capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is telling Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be secure. And if things fail it would be up to Belgium to rescue Euroclear. That's an additional reason why it's so crucial for Belgium to get ironclad guarantees for Euroclear."

Europe In a Difficult Position from Multiple Fronts

The situation is urgent, caution seven EU member states including those bordering 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," states leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do afterwards. That's why we have to reach an agreement in a week's time".

While Russia is unyielding its money should not be touched, there are additional apprehensions among European figures that the US may want to employ Russia's frozen billions for another purpose, as part of its own diplomatic proposal.

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

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