Moscow Responds at Europe's Proposal to Loan Immobilized Moscow's Cash to Kyiv

Kyiv remains facing a severe shortage of funding to sustain its military and economy afloat, after nearly four years of the ongoing invasion by Moscow.

For Europe, the remedy to addressing Kyiv's budget hole of €135.7bn for the next two years is found in frozen Russian assets sitting in Belgian bank Euroclear, and European Union officials hope to give it the green light at their meeting in Brussels next week.

Russian officials caution the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a definitive agreement is made.

'Just' to Use Russia's Assets, Assert Ukraine and the EU

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

The EU and Ukraine contend that that capital should be used to restore what Russia has destroyed: Brussels calls it a "loan for reparations" and has devised a plan to prop up Ukraine's economy to the tune of €90bn.

"It's only fair that Moscow's blocked funds should be used to reconstruct what Russia has destroyed – and that those funds then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "enable Ukraine to defend itself effectively against any future Russian attacks".

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

Belgium is concerned it will be saddled with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain says using the assets could "undermine the global financial architecture".

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

Belgium's PM Bart de Wever has presented the EU with 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 "poses significant risks" for his country.

What is the EU's Plan?

European Union officials is working to the wire prior to next Thursday's summit to agree on a arrangement that Belgium can accept.

So far the EU has avoided using the assets themselves directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is considered safe as Russia is under sanction and the proceeds are not Moscow's sovereign assets.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has struggled to make up the shortfall caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU options aimed at supplying Ukraine with €90bn, to cover a majority of its funding needs.

• The first is to borrow the funds on the markets, backed by the EU budget as a surety. This is Belgium's first choice but it demands a unanimous vote by EU leaders and that would be problematic when two member states object to funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in securities but have now largely turned into cash. That funding is owned by Euroclear deposited at the European Central Bank.

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

The scheme is for Belgium to be safeguarded with a insurance encompassing 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.

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 set to approve on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

Heretofore 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 emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the financial well-being of the union" continues.

The Reasons Belgium is Still Not On Board

Belgium is adamant it remains a strong supporter of Ukraine, but identifies regulatory pitfalls in the plan and fears 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 being pressured from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is approximately €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 assurances for the loan itself, Belgium fears an further exposure of being vulnerable to extra legal costs.

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

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

"Why do we have these bank rules? It's because we want banks to be stable. And if things fail it would fall to Belgium to bail out Euroclear. That's an additional reason why it's so crucial for Belgium to get water-tight guarantees for Euroclear."

Europe Under Pressure from Every Direction

Time is of the essence, warn seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "the financially feasible and politically realistic solution".

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

While Russia is adamant its money should not be touched, 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 diplomatic proposal.

Zelensky has stated Ukraine is working with Europe and the US on a reconstruction fund, but he is also mindful the US has been holding discussions with Russia about potential collaboration.

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