Moscow Retaliates at the EU's Scheme to Lend Immobilized Moscow's Cash to Kyiv

Ukraine is depleting its cash to keep going its military and economy afloat, after almost four years of the ongoing invasion by Moscow.

From the EU's perspective, the answer to filling Ukraine's funding gap of €135.7bn for the following biennium rests with assets belonging to Russia that are frozen held by Belgian bank Euroclear, and Brussels aim to finalize the plan at their meeting in Brussels next week.

Authorities in Russia warn the EU plan would be an confiscation, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Just' to Employ Moscow's Funds, Argue Ukraine and the EU

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

European and Ukrainian authorities contend that those funds should be used to restore what Russia has devastated: EU officials refers to it as a "reconstruction loan" and has come up with a plan to support Ukraine's economy amounting to €90bn.

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

German Chancellor Friedrich Merz says the assets will "enable Ukraine to shield itself effectively against future Russian attacks".

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

Authorities in Brussels 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 immobilised 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 agree to the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

The Details of the EU's Proposal?

The EU is under pressure before next Thursday's summit to finalize a compromise that Belgium can accept.

Until now the EU has refrained from touching the frozen capital directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the revenue is considered safe as Russia is sanctioned and the proceeds are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to make up the shortfall caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at furnishing Ukraine with €90bn, to finance a majority of its financial requirements.

• Option one is to borrow the funds on the markets, secured against the EU budget as a guarantee. This is Belgium's first choice but it requires a consensus by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the frozen Russian funds, which were originally held in securities but have now mostly turned into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

Brussels' executive arm recognizes Belgium has justified fears and states it is confident it has resolved them.

The scheme 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, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

In the event that Russia targeted Belgium itself, any ruling by a Russian court would not be enforced in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

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 set to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the economic security of the union" continues.

The Reasons Belgium is Remains On Board

The Belgian government is adamant it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and is concerned about being shouldering the consequences if things go wrong.

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

"The Belgian economy is not large. Belgian GDP is approximately €565bn – imagine 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 sufficient protections for the loan itself, Belgium worries about an additional danger of being exposed to extra legal costs.

Prof Colaert also argues the requirement for Euroclear to issue credit to the EU would breach EU banking regulations.

"Financial institutions need to follow prudential rules and shouldn't concentrate risk. Now the EU is asking Euroclear to do precisely that.

"What is the purpose of these financial regulations? It's because we want banks to be stable. And if things fail it would become the responsibility of Belgium to rescue Euroclear. That's a further cause why it's so vital for Belgium to obtain ironclad protections for Euroclear."

Europe Under Pressure from Multiple Fronts

Time is of the essence, caution seven 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 politically realistic solution".

"This is a crucial test for us," states leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to succeed in a week's time".

While Russia is adamant its money should not be used, there are further worries among European figures that the US may want to employ Russia's immobilized billions for another purpose, as part of its own peace plan.

Zelensky has stated Ukraine is coordinating with Europe and the US on a rebuilding 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 referred to $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving