Frozen Russian assets have become a hot topic not only in Ukraine but also in Europe, the United States, and Russia itself—though for entirely different reasons in each place. Ukraine wants the Russian Central Bank’s funds to be transferred to its budget, as the amount would surpass all international aid Kyiv has received over the past three years of war. The European Union remains divided on the issue, with Belgium and France, among others, slowing the process. The U.S. believes Europe is benefiting from these assets by using them to offset the aid it has provided to Ukraine, while Russia is actively working to block their use on the international stage.
In Summary:
- Freezing of Russian Assets: In response to Russia’s 2022 invasion of Ukraine, Western nations froze a significant portion (around $300–$335 billion) of the Russian Central Bank’s assets. These funds are to remain frozen until Russia compensates Ukraine for the damage it has caused.
- The Cost of Rebuilding Ukraine: The estimated cost of Ukraine’s reconstruction exceeds $411 billion and could ultimately surpass $1 trillion. The sheer scale of financial needs has fueled debates about using Russian assets for reconstruction.
- G7 Loan Plan Secured by Interest Earnings: The G7 nations have agreed on a plan to lend Ukraine $50 billion, backed by future interest earnings generated by frozen Russian assets.
- Legal Debate Over Confiscation: A fundamental legal debate surrounds whether state assets can be legally confiscated and transferred to Ukraine. Key legal obstacles include the principle of sovereign immunity, investment protections, and the prohibition of retroactive laws.
- Arguments for Confiscation as a ‘Countermeasure’: Some legal experts (such as the RDI report) argue that confiscation is a permissible countermeasure under international law (per ARSIWA) to compel Russia to cease its aggression and pay reparations. They emphasize the unprecedented nature of Russia’s actions.
- The Reversibility Requirement for Countermeasures: A major legal counterargument is that countermeasures must be temporary and reversible to incentivize a state to change its behavior rather than simply serve as punishment. Confiscation is permanent, which undermines its legality under this interpretation.
- Proposal to Seize Only the Profits: As a less legally controversial alternative, the EU is considering seizing the interest earnings generated by frozen assets (estimated at around €3 billion annually) rather than the assets themselves. However, even this approach raises legal concerns, including objections from the European Central Bank.
- Key Role of Euroclear: A significant portion of the frozen assets (up to €190 billion) is held in Belgium’s Euroclear depository, generating substantial profits. This raises questions about risk and profit-sharing among EU nations.
- Economic and Political Risks: Confiscating (or even seizing interest earnings from) Russian assets carries risks, including financial system destabilization, reduced trust in the euro and dollar as reserve currencies, and the creation of dangerous precedents. There are also concerns about Russian retaliation and negative reactions from Global South nations.
- Historical Precedents and Moral Considerations: Proponents of confiscation cite historical precedents (such as German and Iraqi assets after World War II and the Gulf War) and argue that the scale of Russian aggression justifies extraordinary measures. They stress that legal protections should not shield a state committing such blatant violations of international law.
Frozen Russian Assets and Ukraine’s Reconstruction
Within days of Russia’s invasion of Ukraine in February 2022, Western nations froze Russian Central Bank funds held in their jurisdictions. In March 2023—before the destruction of the Kakhovka Dam—the Ukrainian government, the World Bank, the European Commission, and the United Nations published a joint assessment estimating Ukraine’s total reconstruction and repair costs at $411 billion (approximately €383 billion). This figure could ultimately exceed $1 trillion (around €911 billion), depending on the course of the war and further destruction. The Kyiv School of Economics has provided detailed assessments of the damage inflicted on Ukraine.
In May 2023, the G7 nations and the European Union announced that approximately $300 billion (€275 billion) in frozen Russian Central Bank assets would remain frozen “until Russia pays for the damage it has caused to Ukraine.” At the time, this amount represented nearly half of Russia’s total foreign currency and gold reserves. By late July 2023, the total amount of frozen Russian assets in these countries was estimated at $335 billion (€300 billion).
The vast majority of these frozen assets—over €200 billion—are held in Europe. The United States possesses only a small portion, estimated at around $5 billion, while Japan also holds a certain amount, though the exact figures remain unclear.
Josep Borrell, the EU’s foreign policy chief, has stated that he wants EU countries to confiscate frozen Russian assets to cover the costs of rebuilding Ukraine after the war. In response, Russian Deputy Foreign Minister Alexander Grushko called Borrell’s initiative “complete lawlessness” and warned that such a move would ultimately harm Europe. At the same time, Russia has threatened retaliation by seizing assets belonging to the European Union. The fact that opinions on this issue remain divided within Europe is evident in comments from Austria’s Foreign Minister Alexander Schallenberg, who cautioned that confiscating Russian assets without an “indisputable” legal basis would be a “massive step backward and essentially a disgrace” for the EU, in his view.
In October 2024, G7 countries finalized a plan to provide Ukraine with a $50 billion (€47.5 billion) loan, secured by approximately $3 billion in annual interest generated by frozen Russian assets. The United States committed $20 billion to this amount, with the remainder coming from the European Union, the United Kingdom, Canada, and Japan.
Frozen Russian Private and State Assets: What’s the Difference?
There is a legal distinction between private assets—such as a Russian oligarch’s yacht—and state assets. Private assets are relatively easy to freeze, for example, if an individual is deemed to “benefit from or support the Russian government.” However, confiscating these assets is much more difficult, as authorities typically must first prove that they are proceeds of a crime. Evasion or circumvention of sanctions qualifies as such a crime, but only the portion of the assets involved in the violation can be confiscated.
When it comes to seizing frozen Russian state assets, the challenge is how to carry out the process without violating international treaties that protect cross-border investments or the principle that laws and regulations cannot be applied retroactively. Russia’s rights also include those stemming from sovereign immunity, which prevents one state from seizing the property of another. Experts warn that such a move could set dangerous precedents. Risks also include deepening mistrust among Global South nations, which may perceive double standards when Western interests are at stake, and reinforcing the view that the West is weaponizing the international financial system.
Euroclear and Clearstream: What Are They?
Euroclear Bank is a central securities depository headquartered in Belgium. It holds frozen Russian assets, which have been variously estimated at €125 billion, €180 billion, or even €190 billion. In the first nine months of 2023, Euroclear generated €3 billion ($3.28 billion) in profits from these assets. Belgium projected €625 million in tax revenue from these profits in 2023 and €1.7 billion in 2024. According to Belgian Prime Minister Alexander De Croo, 100% of this tax revenue should go directly to Ukraine.
Another European clearinghouse that holds frozen Russian assets, Clearstream, is based in Luxembourg. Both Belgium and Luxembourg have requested assurances that they will not have to bear the full risks associated with European actions against these assets.
Critics argue that using Euroclear to seize Russian assets is fueling financial fragmentation, as it encourages non-G7 countries to shift to non-Western alternatives like China’s Securities Depository and Clearing Corporation to safeguard their assets. This could make it more difficult to enforce sanctions against Russia and to track financial transactions related to activities such as terrorism financing and nuclear weapons proliferation, according to sources cited on Wikipedia.
Legality of State Asset Confiscation
In September 2023, the Renew Democracy Initiative (RDI) published a report, primarily authored by Laurence Tribe, arguing that Russia’s legal objections to the confiscation of its frozen state assets and their transfer to Ukraine lack any legal, practical, or international validity. According to Tribe:
“There is simply no basis for Russia to claim that it can violate Ukraine’s sovereignty while simultaneously invoking its own sovereignty as an inviolable shield.”
The report contends that the confiscation of Russian assets would be permissible under the international legal doctrine of countermeasures. Under this doctrine, actions that would normally violate international law may be lawful if taken to compel a state to resume compliance with international law. The report cites the Articles on the Responsibility of States for Internationally Wrongful Acts (ARSIWA), which are widely regarded by courts and legal scholars as an accurate codification of customary international law regarding state accountability. Since Russia has demonstrably violated fundamental international laws, confiscation could serve as a legitimate countermeasure to force it into compliance.
Russia’s Legal Response
On January 12, 2024, reports emerged that Russia was preparing legal action to challenge the freezing of its central bank assets in court. Russian officials argue that such legal battles could last for decades, effectively blocking any immediate transfer of these assets to Ukraine.
Must Countermeasures Be Temporary and Reversible?
An article in Foreign Policy challenges the view that seizing and transferring Russia’s frozen assets to Ukraine constitutes a valid countermeasure. It argues that countermeasures must serve to restore compliance with international law, not act as punishment. As such, they must be:
✅ Temporary
✅ Reversible if the violating state resumes compliance
However, asset confiscation is irreversible, as once transferred to Ukraine, these funds cannot be returned to Russia. This makes confiscation punitive rather than corrective, a position widely supported by European policymakers.
Yet, others dispute this interpretation. They cite Commentary 1 to Article 22 of ARSIWA, which states:
“In certain circumstances, an internationally wrongful act by one State may justify the adoption of countermeasures by an injured State, without the use of force, to induce cessation and secure reparations for the harm caused…”
This argument suggests that countermeasures can serve both to induce compliance and to compensate the injured party. The key distinction is not between compliance vs. reparations, but between countermeasures that compensate the victim state and those that impose punishment.
Is Confiscation Truly Irreversible?
Under ARSIWA, countermeasures must be reversible “where possible.” However, proponents of confiscation argue that:
- Once Russia fulfills its obligation to compensate Ukraine, countermeasures should cease.
- Reversibility does not mean reversing Ukraine’s compensation—only that Russia should not face additional measures once its obligations are met.
This ongoing debate reflects the legal and political complexities of seizing Russian state assets, with major implications for international law, financial stability, and geopolitical strategy.
The RDI report responds to the claim that the confiscation of Russian assets is irreversible by arguing that the actual countermeasure being taken is the suspension of sovereign immunity, which Russia would normally enjoy. The report emphasizes that the requirement of reversibility applies not to the frozen assets themselves, but to the suspension of immunity—which can be lifted once Russia begins complying with its international obligations.
Some analysts point out that customary international law evolves over time, and in the current circumstances, it could already be interpreted as recognizing the confiscation of central bank assets as a lawful countermeasure or an act of collective self-defense. Under this reasoning, such an action would be evidence that it has already become an accepted state practice. The RDI report supports this view, stating that:
“Norms of accepted state practice emerge suddenly in moments when the system is under great pressure.”
Additionally, the report cites Michael Scharf, arguing that UN General Assembly resolutions can help “crystallize emerging customs” and serve as “evidence of a new principle of customary international law.”
Furthermore, some analysts argue that because Russia ignored the binding order of the International Court of Justice (ICJ)—which instructed that:
“The Russian Federation shall immediately suspend the military operations it commenced on February 24, 2022, in the territory of Ukraine.”
—and disregarded an emergency UN General Assembly resolution condemning the invasion and demanding immediate withdrawal, third-party states are therefore entitled to take countermeasures to compel Russia to comply with international law.
Other Concerns Regarding the Confiscation of Frozen Russian Assets
Christine Lagarde, President of the European Central Bank (ECB), which holds a position opposing the European Commission on the risks of using profits from frozen Russian assets for Ukraine, has warned the European Union that taking action against these assets could threaten the financial stability of the eurozone and weaken the euro’s status as a reserve currency. She argues that the negative consequences for the EU could outweigh the amount generated for Ukraine. Many international law experts believe that Ukraine’s best chance of securing Russian assets lies in a favorable outcome to the war, after which its claim for reparations under international law would be clear.
The RDI report argues that the claim that such action could weaken a country’s currency is unfounded if all major currencies take the same approach:
“The point is to do it multilaterally. …If others didn’t do it, there could be an exodus from the dollar. But if all major currencies do it, where would people move their money?”
According to other financial analysts, if non-Western governments intended to withdraw their foreign reserves from the West, they would have done so when the West blocked Russia’s access to its reserves and when the G7 declared that the freeze would remain in place until Russia pays reparations to Ukraine. The reality is that Russia’s ability to access its frozen funds is permanently lost, and it remains unclear why transferring these funds to Ukraine would damage the international financial system in a way that has not yet materialized.
Data from the European Central Bank and the U.S. Federal Reserve since the freezing of Russian assets shows no significant shift away from the dollar. In Q2 of 2023, 89.2% of all foreign reserves were held in the currencies of the U.S., EU, Japan, and the UK.
A Sound Precedent
The RDI report argues that:
“Any concerns that confiscating Russian assets would set a dangerous precedent for similar future circumstances rest on the assumption that actions analogous to Russia’s have frequently occurred in the modern era or are likely to happen again. On the contrary, Russia’s war in Ukraine may be unprecedented since World War II.”
Others question how, after seizing Russian assets, Western democracies would be able to convince China or India in the future that they have no right to confiscate any assets they choose.
A similar conclusion was reached by Lawrence Summers, who believes that the G7 should collectively act to use Russian state assets to finance Ukraine’s current expenditures, which have become necessary due to Russia’s aggressive war. According to Summers, this is precisely what the Allies did to Germany and Japan after World War II, what the United States did to Saddam Hussein during the Iraq War, and that there is ample legal precedent for such actions. In his view, such a move would establish a “sound precedent”, ensuring that countries engaging in aggression against their neighbors risk losing their state assets.
