NextFin News - Europe is testing a new route to unlock frozen Russian sovereign assets for Ukraine: moving the funds out of Belgium's Euroclear depository into an EU-level custodian, a structural workaround designed to remove the concentrated legal liability that has blocked the plan for nearly a year. The initiative, confirmed this week, arrives as Kyiv tells allies it needs an additional $27 billion to get through 2026 and as four member states argue that the bloc's own €90 billion support loan — agreed only in April — will not be enough.
The question facing Brussels is not whether the money should be used, but whether the EU can engineer a custody structure that lets Belgium say yes without appearing to surrender to a Moscow court that has already ordered Euroclear to pay €220 billion.
The impasse, and the new path around it
The European Union immobilised roughly €210 billion of Russian central bank assets after Moscow's full-scale invasion in February 2022. About €185 billion of that sits at Euroclear, the Brussels-based central securities depository. The assets themselves have remained untouched; the EU has so far channelled only the windfall profits they generate — around €8 billion — into repaying a €45 billion G7-EU loan agreed in 2024.
Last December, the European Commission proposed a far more ambitious step: converting the frozen cash into a "reparations loan" of up to €165 billion for Ukraine, repayable only after Russia pays war reparations to Kyiv. The plan collapsed within days. Belgium, whose government is led by Prime Minister Bart De Wever, refused to accept a structure that would leave it — as the host state of Euroclear — disproportionately exposed to Russian lawsuits and damages claims. Italy, Bulgaria and Malta also raised concerns. The reparations loan was dropped and replaced by a €90 billion loan backed by the EU budget.
Nine months later, the same legal and political wall still stands — and the pressure to breach it has grown.
On August 27, the foreign ministers of Sweden, the Netherlands, Poland and Spain sent a joint letter to EU foreign policy chief Kaja Kallas, Irish Foreign Minister Helen McEntee (Ireland holds the EU's rotating presidency), Economy Commissioner Valdis Dombrovskis and Enlargement Commissioner Marta Kos. "The Ukraine Support Loan is making a substantial difference, but we are all aware it will not be enough," the ministers wrote. "We believe now is the time to revert to the issue of how we can make further use of Russia's immobilised assets for the benefit of Ukraine."
Their proposal is deliberately procedural: they ask the Commission's technical experts to explore "new options on how to use the immobilised assets for the benefit of Ukraine, which ensure that the risk rests with all EU member states and where no member state holds a disproportionate burden."
On September 10, the pressure widened. A letter signed by 122 members of the European Parliament from across the political spectrum called on the Commission to produce a new proposal that overcomes the legal and financial objections that have stalled the plan. The same day, European officials confirmed that one option under discussion would change not only how the Russian money is used, but where it is held and which institution is responsible for its custody.
The idea is to move the assets out of Euroclear and entrust them to a new custodian under EU control. If a new EU-level structure or banking institution replaced Euroclear as custodian, legal responsibility would shift with the funds to the pan-European level. It would then be the EU, not Belgium, that would have to respond to any Russian lawsuits or demands for the return of funds — directly addressing the concern the Belgian government has cited in its objections.
Ukraine has backed the concept. "Ukraine's Ministry of Finance has already put forward a specific proposal to the European side," Heorhii Tykhyi, a spokesman for Ukraine's Ministry of Foreign Affairs, said. "It concerns creating an EU-level mechanism to which these funds could be entrusted. The decision on their actual use for Ukraine's defence, resilience and recovery needs would then be made collectively, with distributed responsibility across all EU member state governments."
Brussels is cautious. Officials describe the custodian-transfer idea as a theoretical possibility rather than a ready-made plan. No legal or financial mechanism for the transfer has been worked out, and there is no draft legislative proposal from the Commission. To move forward, the executive would need to set out a legal basis for the transfer, choose or create a financial structure to manage the assets, define the instrument's governance, and clarify how any losses or liability would be shared if courts ruled in Russia's favour.
A second track is also in play. The Parliamentary Assembly of the Council of Europe has proposed transferring frozen Russian assets to Ukraine on the basis of two rulings by the European Court of Human Rights — a legal argument that would anchor the move in existing jurisprudence rather than new legislation.
Why Belgium holds the keys
The frozen-assets debate has always been less about economics than about who carries the legal risk. Euroclear is a Belgian company supervised by Belgian authorities. Under the structure the Commission proposed last December, Belgium would have been the natural defendant in any Russian claim — and Moscow has shown it is willing to litigate.
The scale of that threat became concrete this year. Russia's central bank filed an 18.2 trillion rouble lawsuit against Euroclear in December 2025. A Moscow court upheld the claim in May, ordering Euroclear to pay approximately €220 billion ($233 billion), and rejected the depository's appeal on July 16. Euroclear does not acknowledge the Russian court's jurisdiction, and the ruling is largely symbolic inside the EU. But it is not symbolic for Belgium: the judgment gives Moscow a legal instrument it can try to enforce against Euroclear assets in countries it considers friendly, including China, the United Arab Emirates and Kazakhstan.
Belgian Foreign Minister Maxime Prévot has repeatedly said Belgium needs guarantees that it will not be left alone with the bill if Russia wins a legal case. A person familiar with the talks said recently that "nothing has changed since the debate and disaster last time," and that nobody had yet produced a "magic" solution.
The four-country letter is written with that veto in mind. Its core demand — that "the risk rests with all EU member states" and that "no member state holds a disproportionate burden" — is a direct bid to buy Belgium's consent by spreading exposure across all 27 capitals.
The Commission, for its part, insists the issue never went away. "This issue has never been taken off the agenda," Commission spokesperson Balázs Ujvári said, pointing to the European Council's December 2025 conclusions, which called on the Council and Parliament to keep examining legal and technical options for a reparations loan. But he acknowledged that little had moved: "There was not enough support to move on with this option and to my knowledge, that's where we left it."
At the informal gathering of EU foreign ministers in Wicklow, Ireland, on September 1-2, some ministers raised the use of immobilised Russian assets again. The German Foreign Office readout was terse: "The discussion will continue." No decision was taken.
What the market has priced in — and the second-order move
It is tempting to read the frozen-assets debate as a simple funding question: Ukraine needs money, Russia's money is sitting idle, therefore use it. That is the first-order logic, and it is already fully reflected in the political conversation. The second-order question is what using the assets would actually do to the EU's own financial architecture.
The €90 billion Ukraine Support Loan agreed in April is financed through EU borrowing backed by the EU budget — meaning European taxpayers ultimately stand behind it, with repayment formally linked to war reparations due from Russia. Using the frozen assets through an EU-level custodian would not reduce that exposure; it would repackage it. The assets would move from a Belgian custody account into a collective EU balance-sheet vehicle, and any legal loss would be mutualised across the bloc rather than concentrated in one host state.
That distinction matters for three reasons.
First, it changes the politics of burden-sharing. Germany and other fiscally conservative capitals have resisted open-ended commitments to Ukraine. A structure that appears to make Russia pay — while legally shielding each individual capital — is easier to sell domestically than a direct budget transfer.
Second, it changes the legal character of the assets. Immobilisation was always presented as reversible: the funds are frozen, not confiscated, preserving the principle that sovereign reserves are inviolable. A transfer to an EU custodian with the intent to deploy the principal for Ukraine's defence would move the bloc closer to de facto confiscation, even if the transaction is labelled a loan repayable upon Russian reparations.
Third, it sets a precedent that outlives this war. If the EU succeeds in moving sovereign reserves out of a host-state depository and into a politically controlled vehicle, other jurisdictions will take note — including those whose reserves could one day be on the wrong side of a Western sanctions coalition.
Polish Foreign Minister Radoslaw Sikorski has framed the choice in stark terms: "Russia will not get this money back until it pays reparations to Ukraine, so it is better to use it to stop the aggression — that is, to defend Ukraine — rather than wait until the end of Russia's aggression to spend it on reconstruction."
The counter-thesis: why caution is not cowardice
Belgium's resistance is often painted in Kyiv and in some European capitals as obstructionism. The strongest version of the Belgian argument is more substantive than that.
Confiscating or repurposing sovereign central bank reserves would strike at a foundational norm of the international financial system: that reserves held abroad are safe from political seizure. That norm is what makes countries willing to hold reserves in euros and dollars in the first place. If the EU is seen to have breached it, the long-term cost could exceed the €210 billion at stake. Russia's reserves are already immobilised and effectively lost to Moscow; the marginal benefit of converting them into a loan is real but bounded. The marginal cost — a precedent that accelerates the fragmentation of the reserve system and invites retaliatory seizures of Western assets abroad — is harder to quantify and easier to trigger.
There is also a credibility question. The EU has spent two years insisting that the assets are immobilised, not confiscated, and that their use would remain within the bounds of international law. A custodian transfer designed to achieve through structure what the bloc could not achieve through legislation risks being read as legal engineering rather than legal resolution — and could strengthen, not weaken, Russia's case in international courts.
The test of whether that counter-thesis holds is concrete: if the Commission produces a mechanism that wins unanimous Council support — including Belgium's — while the European Court of Human Rights framework is simultaneously validated, the caution argument weakens. If, instead, Belgium holds its ground and the custodian idea dies in technical working groups, the norm-preserving case will have prevailed by default.
What to watch
The immediate pressure point is Ukraine's financing gap. The International Monetary Fund's baseline scenario puts the cumulative shortfall at $140.3 billion over 2026-2029. In September, President Volodymyr Zelensky told European allies that Kyiv needs an additional $27 billion to get through this year alone — a request that surprised and unsettled several European capitals. The EU's €90 billion support loan has so far disbursed €11.6 billion, of which €8.4 billion is for defence procurement.
Against that backdrop, the frozen assets are the only pool of money large enough to move the dial without new appropriations from national treasuries.
Three scenarios now look plausible. In the base case, the Commission launches a technical examination of the custodian-transfer option and the lien-based alternatives, but unanimity remains out of reach before year-end; Ukraine bridges its 2026 gap through a mix of the EU loan, IMF programmes and bilateral aid. In the upside case, a shared-liability structure wins Belgian acquiescence, the assets move to an EU vehicle, and Kyiv gains access to a new tranche of funding tied to the immobilised principal. In the downside case, Belgium refuses any structure that touches the assets, the €210 billion stays frozen in substance as well as in name, and European taxpayers absorb a larger share of Ukraine's multi-year gap.
The falsifying signal for the view that a breakthrough is achievable this cycle is straightforward: a Commission legislative proposal accompanied by a Council working-party mandate on asset transfer. Without both, the new path is a discussion, not a decision.
For now, Europe's position can be summarised in one line: it is willing to move Russia's money — but only if nobody in Europe can be seen to have moved it.
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