Moscow Responds at the EU's Proposal to Loan Immobilized Russian Assets to Kyiv

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

In the view of European leaders, the solution to plugging Kyiv's budget hole of €135.7bn for the coming 24 months lies in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and EU leaders hope to finalize the plan at their EU leaders' conference next week.

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

'Only Fair' to Utilize Russia's Assets, Say Ukraine and the EU

Overall, Russia has about €210bn of its state reserves frozen in the EU, and €185bn of that is managed by Euroclear.

The EU and Ukraine argue that that capital should be used to reconstruct what Russia has devastated: Brussels terms it a "loan for reparations" and has come up with a plan to bolster Ukraine's economy valued at €90bn.

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

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

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

Belgium is anxious it will be saddled with an massive bill if it all fails, and Euroclear chief executive Valérie Urbain argues using the assets could "undermine the global financial architecture".

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

The leader of Belgium Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "presents significant risks" for his country.

What is the EU's Proposal?

Brussels is working to the wire ahead of next Thursday's summit to finalize a arrangement that Belgium can agree to.

Previously the EU has refrained from accessing the principal funds directly but for the past year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the revenue is deemed permissible as Russia is subject to sanctions and the returns are not Russian sovereign property.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has found it difficult to cover the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU options aimed at providing Ukraine with €90bn, to cover a majority of its budgetary necessities.

• One is to secure the capital on the markets, secured against 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 oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Russian assets, which were at first held in securities but have now largely matured into cash. That capital is owned by Euroclear located within the European Central Bank.

The European Commission accepts Belgium has legitimate concerns and says it is assured it has dealt with them.

The plan is for Belgium to be shielded with a insurance covering 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 clearing house which are in the EU.

If Russia went after Belgium itself, any decision by a Russian court would not be accepted in the EU.

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

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

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic interests of the union" continues.

Why Belgium is Not Yet On Board

The Belgian government is firm 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 go wrong.

A typically fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – consider if it would need to bear a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to obtain enough assurances for the loan itself, Belgium fears an additional danger of being vulnerable to extra fines or liabilities.

Prof Colaert also contends the requirement for Euroclear to issue credit to the EU would contravene EU banking regulations.

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

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things fail it would be up to Belgium to bail out Euroclear. That's an additional reason why it's so vital for Belgium to obtain absolute protections for Euroclear."

The European Union Under Pressure from Every Direction

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 financially feasible and practically possible 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 next. That's why we have to succeed in a week's time".

Although Russia is unyielding its money should not be touched, there are added concerns among leaders in Europe that the US may want to employ Russia's blocked funds for another purpose, as part of its own diplomatic proposal.

Zelensky has said Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also mindful the US has been engaging with Russia about potential collaboration.

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