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

Kyiv remains depleting its financial resources to maintain its military and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

From the EU's perspective, the answer to addressing Ukraine's budget hole of €135.7bn for the next two years lies in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials hope to give it the green light at their meeting in Brussels next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was suing Euroclear in a Moscow court ahead of a definitive agreement is made.

'Just' to Employ Moscow's Funds, Say European and Ukrainian Officials

In total, Russia has about €210bn of its funds blocked in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv contend that money should be used to restore what Russia has devastated: The European Commission calls it a "reparations loan" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

"It's only fair that Russia's frozen assets should be used to rebuild what Russia has destroyed – and that those funds then becomes Ukraine's," says Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "enable Ukraine to protect itself successfully against any future Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not only Moscow that is concerned.

Authorities in Brussels is anxious it will be burdened by an massive bill if it all goes wrong, and Euroclear head Valérie Urbain says using the assets could "destabilise the world's financial order".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "carries significant risks" for his country.

Explaining the EU's Plan?

Brussels is under pressure ahead of next Thursday's summit to come up with a arrangement that Belgium can support.

Until now the EU has held off accessing the assets themselves directly but starting in 2024 has directed the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the interest is seen as safe as Russia is subject to sanctions and the returns 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 compensate for the deficit left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU options aimed at providing Ukraine with €90bn, to finance two-thirds of its financial requirements.

• Option one is to secure the capital on the markets, secured against the EU budget as a guarantee. This is Belgium's first choice but it demands a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia object to funding Ukraine's military.
• That leaves loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now mostly been converted into cash. That capital is an asset of Euroclear held in the European Central Bank.

The European Commission recognizes Belgium has justified fears and claims it is convinced it has addressed them.

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

If Euroclear incur losses of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

If Russia took legal action against Belgium itself, any decision 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 for the foreseeable future.

Until now they have had to vote unanimously every six months to continue the freeze, which could have meant a constant 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 financial well-being of the union" continues.

The Reasons Belgium is Not Yet Convinced

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

A usually partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from other European officials.

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – imagine if it would need to shoulder a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to arrange adequate guarantees for the loan itself, Belgium worries about an additional danger of being subject to extra fines or liabilities.

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

"Banks need to comply with capital and liquidity requirements and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these financial regulations? It's because we want banks to be stable. And if things go wrong it would become the responsibility of Belgium to save Euroclear. That's a further cause why it's so vital for Belgium to secure absolute guarantees for Euroclear."

The European Union Under Pressure from Every Direction

Time is of the essence, caution seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the most economically realistic and politically achievable solution".

"It's a matter of destiny 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 finalize the deal in a week's time".

Although Russia is adamant its money should not be touched, there are added concerns among EU officials that the US may want to employ Russia's blocked funds in another way, as part of its own peace plan.

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

An early draft of the US peace plan suggested $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving