Russia Responds at Europe's Plan to Lend Immobilized Russian Cash to Kyiv

Kyiv remains depleting its cash to maintain its military and economy, after close to 48 months of Russia's full-scale war.

From the EU's perspective, the remedy to addressing Ukraine's financial shortfall of €135.7bn for the following biennium is found in Moscow's immobilized funds located within Belgian bank Euroclear, and Brussels aim to give it the green light at their meeting in Brussels next week.

Moscow's representatives caution the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

'Just' to Employ Russia's Funds, Say Ukraine and the EU

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

The EU and Ukraine argue that those funds should be used to rebuild what Russia has laid waste to: Brussels terms it a "loan for reparations" and has devised a plan to prop up Ukraine's economy valued at €90bn.

"It is only just that Russia's frozen assets should be used to reconstruct what Russia has destroyed – and that money then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

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

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

Belgium is worried it will be left with an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "destabilise the global financial architecture".

Euroclear also has an approximate €16-17bn frozen 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 reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

The Details of the EU's Proposal?

The EU is racing against time before next Thursday's summit to agree on a compromise that Belgium can accept.

So far the EU has refrained from using the assets themselves directly but starting in 2024 has paid the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is considered permissible as Russia is under sanction and the returns are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

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

• The first is to borrow the funds on financial markets, backed by the EU budget as a collateral. This is Belgium's favored solution but it demands a consensus by EU leaders and that would be problematic when two member states are against funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now predominantly turned into cash. That capital is owned by Euroclear deposited at the European Central Bank.

The European Commission recognizes Belgium has justified fears and claims it is assured it has addressed them.

The proposal is for Belgium to be shielded with a assurance 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.

In the event that Russia took legal action against Belgium itself, any decision by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are set to approve 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 extend the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Still Not Satisfied

The Belgian government is insistent it remains a strong supporter of Ukraine, but sees juridical dangers in the plan and fears being shouldering the repercussions if things fail.

A normally fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from other European officials.

"Belgium is a small economy. Belgian GDP is around €565bn – think about if it would need to bear a €185bn bill," says Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to obtain adequate assurances for the loan itself, Belgium fears an added risk of being exposed to extra fines or liabilities.

Prof Colaert also believes the requirement for Euroclear to issue credit to the EU would breach EU banking regulations.

"Lenders need to follow prudential rules and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do precisely that.

"Why do we have these banking laws? It's because we want banks to be solvent. And if things turn sour it would be up to Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to get water-tight assurances for Euroclear."

EU Leaders Facing Strain from Multiple Fronts

Time is of the essence, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the most economically realistic and politically realistic solution".

"It's a matter of destiny 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".

Although Russia is adamant its money should not be accessed, there are additional apprehensions among European figures that the US may want to employ Russia's frozen billions differently, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also cognizant the US has been engaging 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