Russia’s central bank has sued Euroclear in Moscow as the European Union moves to ring‑fence frozen Russian reserves and press ahead with a ‘reparations loan’ for Ukraine. EU ambassadors agreed on 11 December to immobilise the Central Bank of Russia’s assets in Europe on an open‑ended basis, with leaders due to decide financing options at the 18–19 December European Council.
Around €210bn of Russian central bank assets are immobilised in the EU, the majority at Brussels‑based Euroclear. The balances have swelled as coupons and redemptions on sanctioned securities matured, creating large cash positions under EU control. Euroclear’s latest disclosures point to roughly €193bn in Russia‑linked sanctioned balances on its books.
The European Commission has outlined two routes to finance Ukraine’s 2026–2027 needs: fresh EU market borrowing backed by the budget, or a zero‑interest ‘reparations loan’ funded by borrowing cash balances from EU institutions holding immobilised Russian central bank assets. Under the loan concept, Ukraine would repay only once Russia pays court‑recognised compensation. The Commission says the approach respects sovereign immunity as title to the assets does not change.
Belgium, home to Euroclear, is seeking watertight risk‑sharing before backing the loan. Brussels wants guarantees that any adverse rulings or retaliation targeting Euroclear would be collectively covered, not left to Belgium alone. The Commission has signalled flexibility on additional safeguards, and Germany has indicated readiness to support the risk pool.
To stabilise the legal position, the immobilisation was shifted from a renew‑every‑six‑months sanctions footing to an emergency economic measure under Article 122 TFEU, adopted by qualified majority. Release would require both the removal of objective risks to the EU economy and Russia’s payment of reparations. The legal tool has prior precedent in COVID‑19 and energy‑market measures.
Russia’s lawsuit, filed in a Moscow arbitration court, demands damages over the freeze. EU officials dismiss the action as expected and argue that EU institutions are protected under the sanctions framework. The European Central Bank has nevertheless cautioned that any move beyond interest‑flows could affect confidence in the euro, underscoring the need for robust safeguards.
A specific concern is Euroclear’s exposure inside Russia and the risk of mirror seizures. EU officials say central securities depositories can offset any loss of Euroclear assets in Russia with Russian assets immobilised in the EU, including those of Russia’s National Settlement Depository. Reported figures point to roughly €17bn of Euroclear assets in Russia and around €30bn of NSD assets held within the EU.
Euroclear and Belgian policymakers warn that forcing a large, concentrated loan exposure through one market utility could strain prudential ratios and unsettle investors. Euroclear has publicly described the reparations loan structure as “very fragile” and flagged the risk of an investor pullback from euro‑area markets if the legal construction is perceived as quasi‑confiscatory.
The EU has so far avoided touching principal by directing only the net ‘windfall’ income generated since 15 February 2024 to Ukraine. Council acts adopted in May 2024 created that channel; Euroclear’s own statements indicate contributions in 2024 of about €3.5bn, with further payments scheduled under the regime.
Member‑state positions remain divided on scale and method. Nordic capitals have opposed new joint EU debt and pressed to rely on Russian assets; others emphasise market‑based financing. A group of seven leaders, including from the Baltics, Finland, Ireland, Poland and Sweden, has urged rapid adoption of the reparations loan as the most feasible option.
Across the Atlantic, early drafts of a US‑led peace framework circulated in November reportedly proposed using about $100bn of Russian assets under US management, with profit‑sharing and a separate US‑Russia investment vehicle; later reporting indicated the clause was removed after European pushback. EU officials argue that locking assets under Article 122 reduces the risk of external diversion.
For Ukraine’s finance ministry, timing is critical. The Commission has warned partners that additional EU funding pressure arises from the second quarter of 2026, and leaders will weigh how to sequence disbursements alongside the G7’s Extraordinary Revenue Acceleration loans. A durable EU decision this month would give Kyiv firmer budget planning signals for 2026–2027.
For Belgium, the calculus is legal and macro‑financial. Euroclear is a systemically important market utility; any mis‑step could trigger litigation and counter‑measures far beyond EU courts. That is why Brussels is pressing for explicit, pan‑EU guarantees and for a permanent legal base that removes veto risk, before agreeing to advance the cash balances.
Next steps are compressed. The Council must finalise the Article 122 act via written procedure and settle the structure of guarantees acceptable to Belgium ahead of the 18–19 December summit. If leaders coalesce around the reparations loan, drafting will need to codify the offset rules, prudential carve‑outs for Euroclear, and the repayment trigger linked to legally recognised reparations.