Russia Retaliates at the EU's Scheme to Lend Frozen Russian Assets to Ukraine

Kyiv remains facing a severe shortage of cash to sustain its military and economy, after nearly four years of Russia's full-scale war.

From the EU's perspective, the remedy to filling Kyiv's funding gap of €135.7bn for the coming 24 months is found in frozen Russian assets located within Belgian bank Euroclear, and European Union officials seek to give it the green light at their Brussels summit next week.

Russian officials state the EU plan would be an confiscation, and Russia's central bank stated on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Only Fair' to Employ Moscow's Assets, Say Kyiv and Brussels

In total, Russia has approximately €210bn of its assets blocked in the EU, and €185bn of that is managed by Euroclear.

The EU and Ukraine contend that those funds should be used to reconstruct what Russia has devastated: EU officials calls it a "reconstruction loan" and has come up with 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 rebuild what Russia has devastated – and that those funds then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

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

The legal move by Moscow was anticipated in Brussels. But it is not only Moscow that is dissatisfied.

Authorities in Brussels is worried it will be burdened by an massive bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the global financial architecture".

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

Belgium's PM Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will agree to the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

Explaining the EU's Strategy?

Brussels is racing against time prior to next Thursday's summit to agree on a compromise that Belgium can support.

Previously the EU has refrained from accessing the frozen capital directly but for the past year has directed the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the profits is deemed permissible as Russia is under sanction and the returns are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has struggled to compensate for the deficit caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU options seeking to providing Ukraine with €90bn, to cover a majority of its financial requirements.

• The first is to raise the money on capital markets, backed by 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 Hungary and Slovakia object to funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were originally held in securities but have now predominantly been converted into cash. That capital is owned by Euroclear deposited at the European Central Bank.

Brussels' executive arm acknowledges Belgium has legitimate concerns and states it is convinced it has resolved them.

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

Should Euroclear incur losses 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.

Should Russia targeted Belgium itself, any judgment by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Remains Convinced

The Belgian government is firm it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and worries about being shouldering the fallout if things fail.

A usually divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is around €565bn – consider if it would need to carry a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to arrange adequate guarantees for the loan itself, Belgium worries about an added risk of being vulnerable to extra legal costs.

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

"Financial institutions need to follow prudential rules 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 secure. And if things turn sour it would fall to Belgium to rescue Euroclear. That's a further cause why it's so vital for Belgium to secure water-tight guarantees for Euroclear."

EU Leaders Under Pressure from Every Direction

The situation is urgent, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the most fiscally viable and practically possible solution".

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be accessed, there are further worries among EU officials that the US may want to use Russia's frozen billions in another way, as part of its own diplomatic proposal.

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 potential collaboration.

An initial document of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving