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Ukraine's funding gap sparks EU urgency
With Ukraine's military and economy on the brink after nearly four years of full-scale war, the European Union is scrambling to approve a €135.7 billion lifeline using frozen Russian assets. EU leaders aim to finalize the plan at next week's Brussels summit, but legal and financial hurdles remain.
Russia's €210 billion frozen in EU banks
Of the €210 billion in Russian assets immobilized across the EU, €185 billion sits in Belgian bank Euroclear. The EU proposes using these funds to cover two-thirds of Ukraine's €90 billion budget shortfall for the next two years, framing it as a "reparations loan" to rebuild war-torn infrastructure.
"It's only fair that Russia's frozen assets should be used to rebuild what Russia has destroyed-and that money then becomes ours,"
Ukrainian President Volodymyr Zelensky
German Chancellor Friedrich Merz echoed the sentiment, stating the funds would "enable Ukraine to protect itself effectively against future Russian attacks."
Russia and Belgium push back
Moscow condemned the plan as "theft," with Russia's central bank filing a lawsuit against Euroclear in a Moscow court on Friday. Belgian officials, meanwhile, warn of catastrophic financial risks. Euroclear CEO Valérie Urbain cautioned that seizing the assets could "destabilize the international financial system," while Belgian Prime Minister Bart De Wever demanded "rational, reasonable, and justified conditions" before endorsing the proposal.
Belgium's concerns center on potential liabilities. With €16-17 billion of Euroclear's own assets trapped in Russia, the country fears being held liable for losses. Professor Veerle Colaert of KU Leuven University noted that requiring Euroclear to lend the funds could violate EU banking regulations, risking the bank's stability and forcing Belgium to bail it out.
EU seeks legal safeguards amid internal divisions
To address Belgium's objections, the European Commission proposed a guarantee covering all €210 billion in frozen Russian assets. If Euroclear suffers losses in Russia, the EU would offset them using assets from Russia's own clearing house held in Europe. The Commission also assured that any Russian court rulings against Belgium would be unenforceable in the EU.
In a critical move, EU ambassadors are expected to vote Friday to freeze Russia's central bank assets indefinitely, eliminating the need for biannual renewals and reducing legal uncertainty for Belgium. The decision invokes Article 122 of the EU Treaties, citing an "immediate threat to the economic interests of the union."
U.S. shadow looms over EU plan
While seven EU member states-including the Baltics, Finland, and Poland-urge swift action, warning of dire consequences if Ukraine's funding collapses, internal divisions persist. Hungary and Slovakia oppose military aid, complicating efforts to secure unanimous approval for alternative proposals, such as raising funds via capital markets.
Adding to the complexity, U.S. officials have floated a competing plan to allocate $100 billion of Russia's frozen assets for reconstruction, with the U.S. retaining 50% of profits. An early draft suggested a joint U.S.-Russia investment project for the remaining funds, though an EU source dismissed the idea as politically unfeasible.
"It's a matter of destiny for us. If we fail, I don't know what we'll do afterwards,"
German MP Norbert Röttgen
Deadline pressure mounts
With the Brussels summit looming, Belgium remains a key holdout. Prime Minister De Wever, backed by a rare domestic political consensus, is negotiating with UK Prime Minister Keir Starmer to bolster legal protections. Meanwhile, Zelensky's government is coordinating with both Europe and the U.S. on a reconstruction fund, though U.S.-Russia talks have raised concerns in Kyiv about potential concessions.
As the clock ticks, EU officials insist the indefinite freeze on Russian assets strengthens their position, making it harder for external actors-like the U.S.-to redirect the funds without EU approval.
