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

Kyiv remains depleting its financial resources to maintain its military and economy afloat, after nearly four years of full-scale conflict with Russia.

In the view of European leaders, the solution to filling Kyiv's financial shortfall of €135.7bn for the next two years rests with frozen Russian assets located within Belgian bank Euroclear, and EU leaders hope to sign that off at their meeting in Brussels next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and the Central Bank of Russia stated on Friday it was taking to court Euroclear in a Moscow court prior to a definitive agreement is made.

'Just' to Utilize Moscow's Assets, Assert European and Ukrainian Officials

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

The EU and Ukraine maintain that money should be used to restore what Russia has laid waste to: EU officials refers to it as a "reparations loan" and has proposed a plan to bolster Ukraine's economy valued at €90bn.

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

Germany's leader Friedrich Merz states the assets will "allow Ukraine to shield itself efficiently against future Russian attacks".

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

Belgium is concerned it will be left with an enormous bill if it all fails, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the international financial system".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will agree to the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

What is the EU's Proposal?

European Union officials is racing against time prior to next Thursday's summit to come up with a compromise that Belgium can accept.

Until now the EU has held off touching the assets themselves directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the interest is considered safe as Russia is sanctioned and the earnings are not property of the Russian state.

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

There are presently two EU options designed to furnishing Ukraine with €90bn, to finance two-thirds of its budgetary necessities.

• Option one is to secure the capital on financial markets, secured against the EU budget as a guarantee. This is Belgium's favored solution but it demands a agreement by all by EU leaders and that would be difficult when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now predominantly turned into cash. That capital is Euroclear property held in the European Central Bank.

Brussels' executive arm accepts Belgium has legitimate concerns and says it is assured it has addressed them.

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

Should 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 went after 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 permanently.

Until now they have had to vote all together every six months to continue the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are planning to use an special provision 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.

Why Belgium is Not Yet On Board

The Belgian government is adamant it remains a staunch ally of Ukraine, but identifies legal risks in the plan and fears being forced to deal with the consequences if things fail.

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

"Belgium is a small economy. Belgian GDP is approximately €565bn – consider if it would need to bear a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to arrange enough assurances for the loan itself, Belgium worries about an additional danger of being subject to extra damages or penalties.

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

"Financial institutions need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do precisely that.

"Why do we have these bank rules? It's because we want banks to be solvent. And if things turn sour it would be up to Belgium to rescue Euroclear. That's another reason why it's so important for Belgium to secure water-tight protections for Euroclear."

EU Leaders Under Pressure from All Sides

The situation is urgent, warn several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "a financially feasible and politically achievable solution".

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

While Russia is insistent its money should not be accessed, there are additional apprehensions among leaders in Europe that the US may want to use Russia's blocked funds differently, as part of its own diplomatic proposal.

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

A preliminary version of the US peace plan mentioned $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving