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

Ukraine is running out of funding to sustain its armed forces and economy, after almost four years of full-scale conflict with Russia.

From the EU's perspective, the solution to plugging Ukraine's budget hole of €135.7bn for the next two years rests with frozen Russian assets sitting in Belgian bank Euroclear, and European Union officials hope to give it the green light at their EU leaders' conference next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and Moscow's monetary authority stated on Friday it was taking to court Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Use Moscow's Assets, Argue European and Ukrainian Officials

Overall, Russia has approximately €210bn of its assets immobilized in the EU, and €185bn of that is in the custody of Euroclear.

The EU and Ukraine contend that that capital should be used to restore what Russia has devastated: EU officials refers to it as a "reparations loan" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

"It's only fair that the assets frozen from Russia should be used to reconstruct what Russia has devastated – and that money then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz argues the assets will "allow Ukraine to defend itself successfully against subsequent Russian attacks".

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

Authorities in Brussels is concerned it will be left with an enormous 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 frozen in Russia.

The leader of Belgium Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

The Details of the EU's Strategy?

European Union officials is working to the wire ahead of next Thursday's summit to come up with a solution that Belgium can support.

Until now the EU has refrained from using the principal funds directly but starting in 2024 has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the revenue is seen as less risky as Russia is under sanction and the earnings are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has found it difficult to compensate for the deficit resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU plans designed to providing Ukraine with €90bn, to finance two-thirds of its budgetary necessities.

• Option one is to raise the money on the 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 problematic when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now predominantly turned into cash. That money is an asset of Euroclear located within the European Central Bank.

Brussels' executive arm acknowledges Belgium has valid worries and says it is assured it has addressed them.

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

Should Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

In the event that Russia went after Belgium itself, any decision by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

Until now 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 expected 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 economic security of the union" continues.

The Reasons Belgium is Not Yet On Board

The Belgian government is insistent it remains a strong supporter of Ukraine, but perceives juridical dangers in the plan and fears being left to handle the consequences if things do not work out.

A normally fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

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

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

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

"Lenders need to comply with capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be solvent. And if things go wrong it would fall to Belgium to bail out Euroclear. That's another reason why it's so crucial for Belgium to get water-tight protections for Euroclear."

EU Leaders Facing Strain from Every Direction

Time is of the essence, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the economically realistic and practically possible solution".

"It's a matter of destiny for us," states leading German conservative MP Norbert Röttgen. "Should we not succeed, 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 adamant its money should not be touched, there are added concerns among leaders in Europe that the US may want to deploy Russia's frozen billions differently, as part of its own diplomatic proposal.

Zelensky has said Ukraine is working with Europe and the US on a recovery fund, but he is also cognizant the US has been engaging with Russia about possible partnership.

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