Russia Responds at the EU's Proposal to Loan Frozen Russian Funds to Ukraine

Ukraine is facing a severe shortage of funding to maintain its armed forces and economy afloat, after almost four years of full-scale conflict with Russia.

For Europe, the answer to filling Ukraine's budget hole of €135.7bn for the following biennium rests with Moscow's immobilized funds located within Belgian bank Euroclear, and Brussels hope to sign that off at their meeting in Brussels next week.

Russian officials caution the EU plan would be an confiscation, and the Central Bank of Russia announced on Friday it was suing Euroclear in a Moscow court prior to a definitive agreement is made.

'Only Fair' to Use Russia's Assets, Argue European and Ukrainian Officials

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

European and Ukrainian authorities contend that that capital should be used to restore what Russia has devastated: EU officials calls it a "reparations loan" and has proposed a plan to prop up Ukraine's economy to the tune of €90bn.

"It is only just that Russia's frozen assets should be used to rebuild what Russia has devastated – and that that capital then becomes ours," states Ukrainian President Volodymyr Zelensky.

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

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

Belgium is concerned it will be left with an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain argues using the assets could "disrupt the world's financial order".

Euroclear also has an roughly €16-17bn immobilised in Russia.

The leader of Belgium Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

The Details of the EU's Proposal?

The EU is working to the wire ahead of next Thursday's summit to finalize a compromise that Belgium can support.

Previously the EU has refrained from touching the assets themselves directly but starting in 2024 has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the profits is considered safe as Russia is subject to sanctions and the earnings are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to cover the gap left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU proposals seeking to furnishing Ukraine with €90bn, to pay for a majority of its funding needs.

• The first is to secure the capital on the markets, guaranteed by the EU budget as a collateral. This is Belgium's first choice but it demands a agreement by all by EU leaders and that would be challenging when two member states object to funding Ukraine's military.
• This makes the other option lending Ukraine cash from the frozen Russian funds, which were originally held in financial instruments but have now mostly been converted into cash. That funding is Euroclear property deposited at the European Central Bank.

The EU's executive recognizes Belgium has justified fears and says it is confident it has resolved them.

The proposal is for Belgium to be protected with a guarantee covering all the €210bn of Russian assets in the EU.

If Euroclear face a financial hit 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 targeted 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 immobilise Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote all together every six months to extend the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Still Not Convinced

Belgium is insistent it remains a strong supporter of Ukraine, but sees regulatory pitfalls in the plan and is concerned about being shouldering the repercussions if things go wrong.

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

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

Although the EU might be able to secure sufficient assurances for the loan itself, Belgium fears an further exposure of being vulnerable to extra damages or penalties.

Prof Colaert also contends the stipulation for Euroclear to issue credit to the EU would breach EU banking regulations.

"Banks need to adhere to stability regulations and shouldn't put all their eggs in one basket. Now the EU is asking 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 go wrong it would fall to Belgium to rescue Euroclear. That's an additional reason why it's so crucial for Belgium to get water-tight protections for Euroclear."

Europe In a Difficult Position from Multiple Fronts

Time is of the essence, warn a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "a fiscally viable and practically possible solution".

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

Although 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 blocked funds for another purpose, as part of its own peace plan.

Zelensky has stated 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.

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