Russia kicks against Europe’s plan to loan Moscow’s frozen cash to Ukraine

Russia has responded to an emerging European Union (EU) proposal to use about €210 billion in Russian central bank assets frozen in the EU to support Ukraine’s financing needs in 2026 and 2027, calling the initiative illegal.

The Russian Central Bank filed a lawsuit in a Moscow court on Friday against Euroclear, the Brussels-based financial depository that holds the bulk of the frozen assets, seeking damages for being barred from managing or disposing of its funds and securities. 

As the EU governments move to clear hurdles ahead of a key summit next week,  Russia also warned that it would challenge any use of the assets in national or international courts.

According to Reuters, the EU plans to indefinitely freeze approximately €210 billion of Russian sovereign assets held in Europe, removing the previous requirement that all 27 member states unanimously renew sanctions every six months.

That procedural change clears a major obstacle for leaders to consider a scheme to use those funds as backing for a large loan to Ukraine at their summit set for later this month.

European officials say Ukraine faces a financing gap of roughly €135.7 billion over the next two years to sustain its defence and civil needs amid the ongoing war, and that predictable support mechanisms are necessary.

The current proposal would treat Russia’s immobilised assets as collateral for a loan, sometimes described as a “reparations loan,” that would only be repaid if and when Moscow compensates Kyiv for war damage.

Responding to the EU’s plan in an official statement, the Russian central bank denounced it as a violation of international law and the principle of sovereign immunity.

“Mechanisms of direct or indirect use of the assets of the Bank of Russia, as well as any other forms of unauthorised use of the assets of the Bank of Russia, are illegal and contrary to international law, including violating the principles of sovereign immunity of assets,” the bank said. 

Analysts and Russian officials have gone further in public comments, with some calling the proposal “theft” and warning of broader retaliatory measures if the EU moves ahead. 

Meanwhile, Reuters reports that EU ambassadors and finance ministers are expected to finalise procedural steps this week, including the indefinite asset freeze, so that leaders can debate the loan proposal at the December 18 summit in Brussels.

Despite Russia’s legal challenge and political warnings, European leaders signal they intend to proceed with measures they see as vital to sustained support for Ukraine.

(Reuters)