Russia Responds at the EU's Plan to Lend Frozen Russian Assets to Kyiv

Kyiv remains facing a severe shortage of financial resources to keep going its armed forces and economy afloat, after close to 48 months of full-scale conflict with Russia.

In the view of European leaders, the remedy to addressing Kyiv's budget hole of €135.7bn for the coming 24 months rests with assets belonging to Russia that are frozen held by Belgian bank Euroclear, and Brussels aim to give it the green light at their EU leaders' conference next week.

Russian officials state 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 ahead of a final decision is made.

'Appropriate' to Employ Moscow's Assets, Assert Ukraine and the EU

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

Brussels and Kyiv contend that that capital should be used to restore what Russia has devastated: Brussels terms it a "loan for reparations" and has devised a plan to bolster Ukraine's economy valued at €90bn.

"It is appropriate that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that money then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

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

Russia's court action was anticipated in Brussels. But it is not just Moscow that is unhappy.

The Belgian government is concerned it will be burdened by an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the global financial architecture".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will endorse the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

Brussels is working to the wire before next Thursday's summit to finalize a solution that Belgium can agree to.

So far the EU has avoided touching the frozen capital directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the profits is deemed permissible as Russia is under sanction and the earnings are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has struggled to cover the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU proposals designed to supplying Ukraine with €90bn, to pay for two-thirds of its funding needs.

• The first is to borrow the funds on capital markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it demands a agreement by all by EU leaders and that would be difficult when Hungary and Slovakia are against funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were initially held in bonds but have now largely matured into cash. That money is Euroclear property held in the European Central Bank.

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

The proposal is for Belgium to be shielded with a assurance applying to 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 targeted Belgium itself, any judgment by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are expected to agree on Friday to permanently block 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 ongoing risk to Belgium.

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Not Yet On Board

Belgium is insistent it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and is concerned about being left to handle the repercussions if things fail.

A usually fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – think about if it would need to bear a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to arrange enough guarantees for the loan itself, Belgium worries about an further exposure of being exposed to extra fines or liabilities.

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

"Banks need to adhere to capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do exactly that.

"What is the purpose of these financial regulations? It's because we want banks to be solvent. And if things fail it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so crucial for Belgium to obtain absolute assurances for Euroclear."

Europe Under Pressure from Every Direction

The situation is urgent, warn seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a economically realistic and politically achievable solution".

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be used, there are added concerns among leaders in Europe that the US may want to deploy Russia's frozen billions in another way, as part of its own peace initiative.

Zelensky has said Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also mindful the US has been engaging with Russia about future co-operation.

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