Moscow Responds at Europe's Proposal to Loan Immobilized Moscow's Funds to Ukraine

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

For Europe, the remedy to filling Ukraine's budget hole of €135.7bn for the next two years rests with frozen Russian assets held by Belgian bank Euroclear, and European Union officials aim to finalize the plan at their EU leaders' conference next week.

Russian officials state the EU plan would be an confiscation, and Moscow's monetary authority announced on Friday it was suing Euroclear in a Moscow court prior to a definitive agreement is made.

'Appropriate' to Utilize Russia's Funds, Say European and Ukrainian Officials

All told, Russia has approximately €210bn of its state reserves immobilized in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv argue that money should be used to reconstruct what Russia has devastated: Brussels refers to it as a "reconstruction loan" and has devised a plan to support Ukraine's economy amounting to €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that money then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "enable Ukraine to protect itself successfully against any future Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is anxious it will be burdened by an huge bill if it all fails, and Euroclear chief executive Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "presents significant risks" for his country.

What is the EU's Strategy?

Brussels is working to the wire before next Thursday's summit to come up with a compromise that Belgium can agree to.

Until now the EU has refrained from using the frozen capital directly but since last year has transferred the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is considered safe as Russia is subject to sanctions and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to cover the gap caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to furnishing Ukraine with €90bn, to finance two-thirds of its funding needs.

• One is to raise the money on the markets, secured against the EU budget as a collateral. This is Belgium's favored solution but it requires a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now largely been converted into cash. That capital is owned by Euroclear deposited at the European Central Bank.

The European Commission accepts Belgium has valid worries and states it is assured it has resolved them.

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

If Euroclear suffer a loss 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 targeted 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 immobilise Russia's central bank assets held in Europe permanently.

Until now they have had to vote unanimously every six months to renew the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the financial well-being of the union" continues.

The Reasons Belgium is Still Not Convinced

Belgium is firm it remains a staunch ally of Ukraine, but perceives regulatory pitfalls in the plan and worries about being shouldering the fallout if things fail.

A usually divided political landscape in this case has united behind Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

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

Although the EU might be able to arrange sufficient guarantees for the loan itself, Belgium fears an added risk of being vulnerable to extra legal costs.

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

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

"What is the purpose of these financial regulations? It's because we want banks to be stable. And if things turn sour it would become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so vital for Belgium to get water-tight protections for Euroclear."

Europe Under Pressure from Multiple Fronts

There is no time to lose, warn a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the fiscally viable and practically possible solution".

"It's a matter of destiny for us," warns 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 insistent its money should not be used, there are further worries among EU officials that the US may want to employ Russia's immobilized billions for another purpose, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a recovery fund, but he is also cognizant the US has been talking to Russia about possible partnership.

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