Russia Hits Back at Europe's Proposal to Loan Frozen Russian Cash to Ukraine

Ukraine is running out of cash to sustain its military and economy, after nearly four years of Russia's full-scale war.

In the view of European leaders, the remedy to addressing Kyiv's funding gap of €135.7bn for the next two years is found in frozen Russian assets located within Belgian bank Euroclear, and Brussels hope to sign that off at their meeting in Brussels next week.

Moscow's representatives state the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a definitive agreement is made.

'Only Fair' to Utilize Moscow's Funds, Assert European and Ukrainian Officials

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

European and Ukrainian authorities contend that that capital should be used to rebuild what Russia has destroyed: Brussels refers to it as a "reconstruction loan" and has come up with a plan to support Ukraine's economy to the tune of €90bn.

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

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

The legal move by Moscow was foreseen in Brussels. But it is not only Moscow that is unhappy.

The Belgian government is anxious it will be left with an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "disrupt the world's financial order".

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

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

The Details of the EU's Proposal?

The EU is under pressure before next Thursday's summit to finalize a compromise that Belgium can agree to.

Until now the EU has avoided using the frozen capital directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the interest is considered safe as Russia is under sanction and the proceeds are not property of the Russian state.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the shortfall left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU plans designed to providing Ukraine with €90bn, to finance a large portion of its budgetary necessities.

• One is to borrow the funds on capital markets, backed by 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 are against funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now predominantly turned into cash. That capital is owned by Euroclear located within the European Central Bank.

Brussels' executive arm acknowledges Belgium has justified fears and says it is convinced it has addressed them.

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

Should Euroclear incur losses of its own assets in Russia, that would be offset 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.

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

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

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets stay blocked 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 legal risks in the plan and worries about being left to handle the repercussions if things fail.

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

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – think about if it would need to bear a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to obtain sufficient assurances for the loan itself, Belgium worries about an added risk of being exposed to extra fines or liabilities.

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

"Lenders need to adhere to prudential rules and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these bank rules? It's because we want banks to be stable. And if things fail it would be up to Belgium to rescue Euroclear. That's another reason why it's so vital for Belgium to secure water-tight protections for Euroclear."

Europe In a Difficult Position from All Sides

Time is of the essence, caution seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "a economically realistic and practically possible solution".

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

Although Russia is insistent its money should not be used, there are further worries among European figures that the US may want to use Russia's frozen billions for another purpose, as part of its own peace initiative.

Zelensky has indicated Ukraine is working with Europe and the US on a recovery fund, but he is also mindful the US has been talking to Russia about potential collaboration.

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