Russia Responds at Europe's Proposal to Lend Frozen Russian Cash to Ukraine

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

From the EU's perspective, the solution to filling Kyiv's funding gap of €135.7bn for the next two years rests with frozen Russian assets held by Belgian bank Euroclear, and European Union officials seek to sign that off at their meeting in Brussels next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was suing Euroclear in a Moscow court prior to a final decision is made.

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

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

The EU and Ukraine contend that that capital should be used to reconstruct what Russia has devastated: Brussels refers to it as a "reconstruction loan" and has come up with a plan to bolster Ukraine's economy valued at €90bn.

"It's only fair that the assets frozen from Russia should be used to reconstruct what Russia has devastated – and that those funds then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

Chancellor Friedrich Merz states the assets will "enable Ukraine to defend itself efficiently against any future Russian attacks".

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

Belgium is worried it will be left with an enormous bill if it all fails, and Euroclear CEO Valérie Urbain argues using the assets could "destabilise the international financial system".

Euroclear also has an approximate €16-17bn frozen in Russia.

Belgian Prime Minister Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "carries significant risks" for his country.

Explaining the EU's Proposal?

European Union officials is under pressure prior to next Thursday's summit to agree on a compromise that Belgium can support.

Previously the EU has avoided 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 profits is seen as permissible as Russia is under sanction and the returns are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has struggled to cover the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals designed to providing Ukraine with €90bn, to pay for two-thirds of its financial requirements.

• One is to borrow the funds on the markets, secured against the EU budget as a surety. This is Belgium's favored solution but it requires a agreement by all by EU leaders and that would be problematic when Budapest and Bratislava object to funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Moscow's immobilized capital, which were originally held in securities but have now mostly turned into cash. That money is an asset of Euroclear held in the European Central Bank.

The EU's executive recognizes Belgium has justified fears and says it is confident it has dealt with them.

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

Should Euroclear incur losses of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own clearing house which are in the EU.

In the event that Russia went after 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 indefinitely.

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

The EU ambassadors are expected 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 interests of the union" continues.

The Reasons Belgium is Remains Satisfied

Brussels is adamant it remains a strong supporter of Ukraine, but identifies legal risks in the plan and fears being shouldering the fallout if things fail.

A typically divided political landscape in this case has united behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

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

Although the EU might be able to obtain sufficient protections for the loan itself, Belgium is concerned about an further exposure of being subject to extra damages or penalties.

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

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

"What is the purpose of these banking laws? It's because we want banks to be solvent. And if things turn sour it would become the responsibility of Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to secure absolute protections for Euroclear."

The European Union In a Difficult Position from All Sides

Time is of the essence, warn a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a financially feasible and politically achievable solution".

"This is a crucial test 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 accessed, there are further worries 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 indicated Ukraine is coordinating with Europe and the US on a recovery fund, but he is also cognizant the US has been holding discussions with Russia about future co-operation.

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