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

Ukraine is facing a severe shortage of funding to maintain its armed forces and economy, after almost four years of the ongoing invasion by Moscow.

For Europe, the remedy to addressing Ukraine's funding gap of €135.7bn for the next two years rests with Moscow's immobilized funds located within Belgian bank Euroclear, and EU leaders hope to sign that off at their meeting in Brussels next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and the Central Bank of Russia announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Appropriate' to Utilize Moscow's Funds, Assert Ukraine and the EU

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

Brussels and Kyiv maintain that those funds should be used to rebuild what Russia has devastated: The European Commission calls it a "reconstruction loan" and has come up with a plan to support Ukraine's economy amounting to €90bn.

"It's only fair that Russia's frozen assets should be used to rebuild what Russia has destroyed – and that those funds then becomes ours," states Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "help Ukraine to defend itself successfully against subsequent Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is concerned.

Belgium is worried it will be saddled with an enormous bill if it all backfires, and Euroclear head Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "carries significant risks" for his country.

Explaining the EU's Proposal?

European Union officials is racing against time before next Thursday's summit to finalize a arrangement that Belgium can agree to.

Previously the EU has held off accessing the frozen capital directly but for the past year has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is deemed less risky as Russia is subject to sanctions and the returns are not property of the Russian state.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to compensate for the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU plans designed to furnishing Ukraine with €90bn, to cover two-thirds of its budgetary necessities.

• The first is to raise the money on capital markets, backed by the EU budget as a guarantee. This is Belgium's first choice but it demands a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia oppose funding Ukraine's military.
• The alternative is lending Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now largely matured into cash. That money is owned by Euroclear located within the European Central Bank.

Brussels' executive arm accepts Belgium has valid worries and states it is assured it has addressed them.

The proposal is for Belgium to be shielded with a guarantee applying to all the €210bn of Russian assets in the EU.

Should Euroclear face a financial hit of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

In the event that Russia went after Belgium itself, any decision by a Russian court would not be enforced in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe permanently.

Previously they have had to vote all together every six months to renew 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 continue to be immobilized as long as an "direct danger to the financial well-being of the union" continues.

Why Belgium is Not Yet Convinced

Belgium is adamant it remains a strong supporter of Ukraine, but identifies legal risks in the plan and is concerned about being left to handle the consequences if things do not work out.

A normally fractured political scene 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 approximately €565bn – imagine if it would need to shoulder a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to arrange adequate protections for the loan itself, Belgium fears an additional danger of being subject to extra damages or penalties.

Prof Colaert also believes the stipulation for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Lenders need to follow stability regulations and shouldn't concentrate risk. Now the EU is telling Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to bail out Euroclear. That's another reason why it's so important for Belgium to obtain water-tight protections for Euroclear."

The European Union Facing Strain from Every Direction

Time is of the essence, warn seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a fiscally viable and politically achievable solution".

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

Although Russia is insistent its money should not be accessed, there are further worries among European figures that the US may want to employ Russia's frozen billions for another purpose, as part of its own peace plan.

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

A preliminary version of the US peace plan suggested $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving