Russia hits back at Europe’s big plan to loan Moscow’s frozen cash to Ukraine

Ukraine is short of funds to maintain its army and economy, after nearly four years of full-scale war with Russia.

For Europe, the solution to plugging Kiev’s €135.7bn (£119bn; $159bn) budget gap for the next two years lies in frozen Russian assets held at Belgian bank Euroclear, and EU leaders hope to sign off on this at a Brussels summit next week.

Russian officials warn that the EU plan would be an act of theft, and the Russian Central Bank announced on Friday that it would sue Euroclear in a Moscow court even before a final decision is made.

In total, Russia has about €210 billion of frozen assets in the EU, of which €185 billion are owned by Euroclear.

The EU and Ukraine argue that the money should be used to rebuild what Russia destroyed: Brussels describes it as a “reparations loan” and has come up with a plan to support the Ukrainian economy to the tune of €90 billion.

“It is only fair that the frozen Russian assets are used to rebuild what Russia destroyed – and that money then becomes ours,” says Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets “will enable Ukraine to effectively protect itself against future Russian attacks.”

And it’s not just Russia that’s unhappy. Belgium is worried it will foot a huge bill if things go wrong, and Valéry Orban, chief executive of Euroclear, says its use could “destabilize the international financial system”.

Euroclear also has an estimated €16-17 billion frozen in Russia.

Belgian Prime Minister Bart De Wever has set for the European Union a series of “rational, reasonable and justified conditions” before it will accept the compensation plan, and has also refused to rule out legal action if it “poses significant risks” to his country.

The European Union is working with all its might before next Thursday’s summit to reach a solution that Belgium can accept.

Until now, the EU has refrained from dealing with the assets themselves directly, but since last year it has paid “windfall profits” from them to Ukraine. In 2024 that was €3.7 billion. Using the benefits legally is seen as safe because Russia is subject to sanctions and the proceeds are not Russian sovereign property.

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

There are currently two proposals from the European Union that aim to provide Ukraine with 90 billion euros, to cover two-thirds of its financing needs.

The first is to raise funds from capital markets, supported by the European Union budget as a guarantee. This is Belgium’s preferred option, but it requires a unanimous vote by EU leaders, and that will be difficult when Hungary and Slovakia object to funding the Ukrainian army.

This means lending Ukraine cash from Russian assets, which were originally held in securities but are now largely in cash. These funds are Euroclear property held at the European Central Bank.

The European Commission, the EU’s executive authority, acknowledges that Belgium has legitimate concerns and says it is confident it has addressed them.

The plan calls for Belgium to be protected with a guarantee covering all Russian assets amounting to 210 billion euros in the European Union.

If Euroclear suffers a loss of its own assets in Russia, a Commission source explained that this would be compensated from assets owned by Russia’s own clearing house and located in the EU.

If Russia goes after Belgium itself, no ruling by a Russian court would be recognized in the EU.

In a major development, European Union ambassadors are expected to agree on Friday to freeze the Russian Central Bank’s assets held in Europe indefinitely.

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

EU ambassadors are set to use the emergency clause under Article 122 of the EU treaties so that assets remain frozen as long as a “direct threat to the economic interests of the Union” continues.

Belgium insists it remains a staunch ally of Ukraine, but sees legal risks in the plan and fears it will be left to deal with the fallout if things go wrong.

The normally divided political landscape has in this case rallied behind Prime Minister Bart de Wever, who is under pressure from his European colleagues and is holding talks with British Prime Minister Sir Keir Starmer in London on Friday.

“Belgium is a small economy,” says Verle Collaert, professor of financial law at KU Leuven. “Belgian GDP is about 565 billion euros – imagine if it would need to foot a bill of 185 billion euros.”

While the EU may be able to secure sufficient guarantees for the loan itself, Belgium fears the additional risk of additional damages or sanctions.

Professor Collart also believes that asking Euroclear to grant an EU loan would violate EU banking regulations.

“Banks need to adhere to capital and liquidity requirements, and should not put all their eggs in one basket. Now the EU is asking Euroclear to do precisely that: lend €185 billion out of €227 billion on its balance sheet to a single counterparty – the EU.”

“This lack of diversification does not reflect sound risk management. Why do we have these banking rules? It is because we want the banks to be stable. If things get worse, it will fall to Belgium to bail out Euroclear. This is another reason why it is very important for Belgium to secure tight guarantees for Euroclear.”

There is no time to waste, warn seven EU member states, including those closest to Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is “the most financially feasible and politically realistic solution”.

“It is a matter of fate for us,” warns prominent German conservative MP Norbert Röttgen. “If we fail, I don’t know what we will do next. That’s why we have to succeed within a week.”

While Russia insists its funds remain untouched, there are additional concerns among European figures that the United States may want to use the frozen Russian billions differently, as part of its own peace plan.

Zelensky said Ukraine was working with Europe and the United States on the reconstruction fund, but he also understood that the United States was talking with Russia about future cooperation.

An early draft of the US peace plan indicated that the US would use $100 billion in frozen Russian assets for reconstruction, with the US getting 50% of the profits and Europe adding another $100 billion. The remaining assets will then be used in some type of joint investment project between the United States and Russia.

An EU source said the added bonus of Friday’s vote of indefinitely immobilizing Russian assets made it difficult for anyone to take the money. The implication is that the United States would then have to gain the support of a majority of EU member states to vote in favor of a plan that would cost it enormous amounts financially.