Moscow Responds at the EU's Plan to Loan Frozen Moscow's Funds to Kyiv

Kyiv remains depleting its funding to maintain its armed forces and economy afloat, after almost four years of full-scale conflict with Russia.

For Europe, the answer to plugging Kyiv's funding gap of €135.7bn for the coming 24 months is found in Moscow's immobilized funds sitting in Belgian bank Euroclear, and Brussels aim to give it the green light at their meeting in Brussels next week.

Russian officials warn the EU plan would be an confiscation, and the Central Bank of Russia declared on Friday it was suing Euroclear in a Moscow court ahead of a definitive agreement is made.

'Appropriate' to Utilize Moscow's Funds, Argue Kyiv and Brussels

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

European and Ukrainian authorities argue that money should be used to reconstruct what Russia has devastated: The European Commission calls it a "reparations loan" and has devised a plan to prop up Ukraine's economy valued at €90bn.

"It's only fair that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that that capital then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "allow Ukraine to defend itself successfully against subsequent Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is concerned it will be left with an massive bill if it all fails, and Euroclear CEO Valérie Urbain says using the assets could "disrupt the global financial architecture".

Euroclear also has an estimated €16-17bn immobilised in Russia.

Belgium's PM Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has refused to rule out legal action if it "poses significant risks" for his country.

The Details of the EU's Strategy?

The EU is working to the wire prior to next Thursday's summit to finalize a compromise that Belgium can agree to.

So far the EU has held off using the frozen capital directly but for the past year has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the interest is considered safe as Russia is subject to sanctions and the returns are not Moscow's sovereign assets.

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

There are presently two EU plans aimed at providing Ukraine with €90bn, to cover a majority of its funding needs.

• The first is to borrow the funds on capital markets, secured against the EU budget as a collateral. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the frozen Russian funds, which were originally held in financial instruments but have now largely turned into cash. That capital is owned by Euroclear located within the European Central Bank.

The European Commission recognizes Belgium has valid worries and says it is assured it has dealt with them.

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

If Euroclear face a financial hit of its own assets in Russia, the shortfall would be covered 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 decision by a Russian court would not be accepted in the EU.

In a significant move, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are expected to use an extraordinary measure 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.

The Reasons Belgium is Not Yet Satisfied

Brussels is firm it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and fears being shouldering the fallout if things fail.

A normally partisan political environment in this case has united behind Prime Minister Bart de Wever, who is being pressured from other European officials.

"The Belgian economy is not large. Belgian GDP is around €565bn – consider if it would need to bear a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to arrange adequate guarantees for the loan itself, Belgium worries about an added risk of being vulnerable to extra damages or penalties.

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

"Lenders need to adhere to capital and liquidity requirements and shouldn't concentrate risk. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things fail it would be up to Belgium to bail out Euroclear. That's an additional reason why it's so crucial for Belgium to secure absolute guarantees for Euroclear."

The European Union Under Pressure from All Sides

The situation is urgent, caution several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the most fiscally viable and practically possible solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "If the plan collapses, 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 touched, there are added concerns among EU officials that the US may want to use Russia's immobilized billions in another way, as part of its own peace initiative.

Zelensky has said Ukraine is in discussions with Europe and the US on a recovery fund, but he is also aware the US has been engaging with Russia about future co-operation.

An initial document of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving