Moscow Retaliates at Europe's Proposal to Loan Frozen Moscow's Assets to Ukraine

Ukraine is running out of cash to keep going its military and economy, after almost four years of full-scale conflict with Russia.

For Europe, the answer to addressing Ukraine's financial shortfall of €135.7bn for the following biennium lies in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials aim to give it the green light at their EU leaders' conference next week.

Russian officials warn the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court ahead of a definitive agreement is made.

'Appropriate' to Use Moscow's Funds, Argue Ukraine and the EU

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

The EU and Ukraine contend that that capital should be used to reconstruct what Russia has destroyed: The European Commission terms it a "reparations loan" and has come up with a plan to prop up Ukraine's economy amounting to €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that those funds then becomes ours," says Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz argues the assets will "help Ukraine to shield itself efficiently against future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is concerned.

Belgium is concerned it will be left with an massive 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 frozen in Russia.

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "carries significant risks" for his country.

The Details of the EU's Proposal?

European Union officials is racing against time ahead of next Thursday's summit to agree on a solution that Belgium can support.

So far the EU has avoided accessing the assets themselves directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the interest is deemed less risky as Russia is under sanction and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to compensate for the gap left by the US decision to virtually halt funding Ukraine under President Donald Trump.

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

• One is to borrow the funds on capital markets, backed by the EU budget as a collateral. This is Belgium's preferred option but it needs a consensus by EU leaders and that would be difficult when Budapest and Bratislava object to funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the frozen Russian funds, which were initially held in securities but have now predominantly been converted into cash. That money is owned by Euroclear held in the European Central Bank.

Brussels' executive arm recognizes Belgium has justified fears and states it is confident it has resolved them.

The proposal is for Belgium to be safeguarded with a assurance encompassing all the €210bn of Russian assets in the EU.

Should Euroclear suffer a loss of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own clearing house which are in the EU.

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

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

Previously they have had to vote by consensus every six months to continue the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "immediate threat to the financial well-being of the union" continues.

Why Belgium is Remains Satisfied

Brussels is insistent it remains a staunch ally of Ukraine, but identifies legal risks in the plan and worries about being forced to deal with the consequences if things go wrong.

A normally fractured political scene in this case has united behind Prime Minister Bart de Wever, who is under pressure from other European officials.

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

While the EU might be able to arrange enough protections for the loan itself, Belgium fears an further exposure of being exposed to extra fines or liabilities.

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

"Financial institutions need to adhere to capital and liquidity requirements and shouldn't put all their eggs in one basket. 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 go wrong it would be up to Belgium to save Euroclear. That's a further cause why it's so vital for Belgium to obtain water-tight assurances for Euroclear."

The European Union Facing Strain from Every Direction

The situation is urgent, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the fiscally viable and politically realistic solution".

"It's a matter of destiny for us," states leading German conservative MP Norbert Röttgen. "If the plan collapses, 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 further worries among European figures that the US may want to deploy Russia's blocked funds differently, as part of its own peace initiative.

Zelensky has indicated Ukraine is in discussions 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