Moscow Responds at Europe's Proposal to Loan Frozen Moscow's Cash to Kyiv

Ukraine is facing a severe shortage of financial resources to sustain its military and economy afloat, after close to 48 months of Russia's full-scale war.

For Europe, the solution to addressing Kyiv's financial shortfall of €135.7bn for the next two years is found in Moscow's immobilized funds held by Belgian bank Euroclear, and EU leaders aim to finalize the plan at their EU leaders' conference next week.

Russian officials caution the EU plan would be an confiscation, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Only Fair' to Utilize Russia's Funds, Argue Kyiv and Brussels

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

The EU and Ukraine maintain that that capital should be used to rebuild what Russia has destroyed: The European Commission refers to it as a "loan for reparations" and has proposed a plan to prop up Ukraine's economy to the tune of €90bn.

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

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

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

Authorities in Brussels is concerned it will be saddled with an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "destabilise the global financial architecture".

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

The leader of Belgium Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate 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.

The Details of the EU's Plan?

European Union officials is under pressure ahead of next Thursday's summit to come up with a compromise that Belgium can agree to.

Until now the EU has avoided accessing the frozen capital directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is deemed safe as Russia is under sanction and the earnings are not property of the Russian state.

But global military support for Ukraine has fallen significantly in 2025, and Europe has found it difficult to make up the gap left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU options aimed at providing Ukraine with €90bn, to cover a large portion of its financial requirements.

• Option one is to borrow the funds on capital markets, secured against the EU budget as a guarantee. This is Belgium's preferred option 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.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were originally held in securities but have now largely matured into cash. That capital is owned by Euroclear held in the European Central Bank.

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

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

Should Euroclear face a financial hit 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 took legal action against Belgium itself, any judgment by a Russian court would not be accepted in the EU.

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

Heretofore they have had to vote unanimously every six months to extend the freeze, which could have meant a repeated 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 economic interests of the union" continues.

Why Belgium is Not Yet Satisfied

The Belgian government is firm it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and is concerned about being forced to deal with the fallout if things go wrong.

A typically fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

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

Although the EU might be able to obtain adequate protections for the loan itself, Belgium is concerned about an additional danger of being vulnerable to extra damages or penalties.

Prof Colaert also contends the requirement for Euroclear to provide a loan to the EU would contravene 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 asking Euroclear to do precisely that.

"What is the purpose of these financial regulations? 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 an additional reason why it's so important for Belgium to secure ironclad assurances for Euroclear."

Europe Facing Strain from Every Direction

The situation is urgent, warn seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "a fiscally viable and politically achievable solution".

"This is a crucial test 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 reach an agreement in a week's time".

Although Russia is unyielding its money should not be used, there are further worries among leaders in Europe that the US may want to use Russia's blocked funds for another purpose, as part of its own peace plan.

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

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