European Union officials are toying with the idea of using frozen Russian assets to finance Ukraine. The European Union wants to provide Ukraine with a loan to finance the country's operations, but it does not want to pay for it from its own budget – it simply does not have the money.
The Union has therefore decided to "secure" the loan with money it already has in its possession – frozen Russian assets. This is money and financial reserves belonging to the Russian central bank, which were blocked in European banks after the start of the war in 2022.
The largest volume of Russian Central Bank assets is frozen in Belgium at Euroclear, a global financial services company that holds approximately €190 billion in assets in its depository, with another €20 to €25 billion located in other EU member states.
Belgium does not agree with this approach because it fears international arbitration. Such a move can only be seen as theft. A loan can only be considered if Russia agrees to the transfer of funds, which is unlikely to ever happen.
Belgium, the most vulnerable country, rejects illegal measures
Belgian Prime Minister Bart De Wever has categorically rejected the proposals of German Chancellor Friedrich Merz and European Commission President Ursula von der Leyen, because theft of this magnitude, sanctioned by the EU, would pose an economic and legal threat not only to Belgium but to Europe as a whole.
Not only the European Central Bank, through its president Christine Lagarde, but also other European states are urging extreme caution in dealing with seized Russian assets.
The economic impact on every citizen of the Union would be extreme. Russia could retaliate by seizing the European companies still operating on its territory, which in 2024 represented assets worth approximately $90 billion.
Such a move by the EU would cause extraordinary turmoil in international markets. Countries and investors could be discouraged from using European financial institutions in the future for fear that their own assets could be seized if the Union finds a sufficient pretext. This would shake the foundations of the entire community's economy.
The extremely negative economic consequences would be global in nature, and Russia, through the head of the Russian Banking Association, Andrei Kostin, has already warned that if the EU "uses Russian assets, Moscow will respond with retaliatory measures and 50 years of litigation may follow."
International law does not allow the confiscation of state property
Not only the Russians, but also legal experts from the EU themselves point out this clear violation of international law.
From the perspective of international law, it is not possible to confiscate foreign state assets. Federico Lupo-Pasini, a professor of law specializing in international finance, pointed out that "a court order requiring the government to seize Russian assets would be illegal under international law and under domestic law, which must respect international norms."
National courts cannot therefore issue a decision to seize assets, but a European Commission regulation can. However, even the Commission cannot issue such a regulation "just like that" – it needs a legal reason to do so. The only legal route under international law would be for the EU to take "countermeasures" against Russia.
Countermeasures are mechanisms that states introduce in response to a violation of international law by another state. However, they must be temporary and reversible – legal experts disagree on whether the seizure of Russian assets would meet these conditions. There is no official decision by an international court that Russia has violated international law.
Even the EU itself has no clear legal path for how to carry out the "confiscation" of Russian assets.
The Union itself does not know how to legally seize the assets
In this regard, a study has been prepared by the European Parliament (EP) that deals with the possibilities under international law of how it would be legally feasible to change the ownership of Russia's frozen assets—especially the assets of the central bank in Belgium—and use them for the reconstruction of Ukraine.You may be interested inConsiderations on the theft of Russian assets are symbolic of collapse on all fronts
The report analyzes the basic legal concepts of "freezing/immobilization/seizing" and "confiscation" – the latter meaning a definitive change of ownership without compensation – as well as the rights and obligations arising from international norms. If a state has committed an unlawful act (such as aggression), it bears international responsibility and is obliged to pay reparations.
The main legal problem is the so-called sovereign immunity of the state – under international law, states have immunity from seizure of their own property in foreign jurisdictions (including central bank reserves) unless they consent to such action or there are exceptions to this rule.
This rule has been confirmed by the International Court of Justice (ICJ) and is generally applied across all countries of the world.
Neither option for seizing assets is legal
The EP report discusses several options for confiscating Russian assets.
The first option involves one-off or temporary measures (third-party countermeasures) that violate the normal rules of immunity but are justifiable as a response to internationally wrongful acts (aggression). However, such measures must generally be temporary, reversible (the main problem with Russia) and purposeful.
Permanent confiscation could be considered a punishment, which is not permissible.
The second option would be a decision by an international court recognizing Ukraine's claim for reparations, and this judgment would also be enforceable against Russia. In that case, part of the assets could be used to pay reparations, but the problem, apart from the time factor, is that Russia does not recognize the jurisdiction of several international courts.
The study presents the most realistic option as placing the frozen assets in a special fund or investment vehicle, from which only the proceeds would be used. This would not mean the definitive confiscation of Russian assets, but the amount of proceeds would fall far short of the costs estimated by the EU.
However, despite political claims about the confiscation of Russian assets, the report does not offer any legal options that would guarantee the "legality of confiscation without legal risks," as any approach would be highly controversial from a legal and economic perspective on a global scale.
From the perspective of international law, there is no legal basis for such a move. In practice, such a move would set a new precedent that a state can lose ownership of its assets, which would change the rules of state immunity and property protection.
The argument of an "unjustified attack on Ukraine" would be irrelevant from this point of view, as there are many such conflicts around the world, albeit not with such high military intensity. The important thing, however, is that even in these conflicts, the principles of international law are respected, which would be violated by the EU's action against Russia, with potentially incalculable consequences.
The EP report therefore clearly shows that there is no legal basis for the full confiscation of Russian state assets.
Europe is heading for disaster
However, if the EU were to proceed with the permanent seizure of Russian assets despite the clear conclusions of the analysis, the Russian Federation would probably launch a series of international lawsuits against Belgium and other states holding its property, and would most likely win them.
The EU has now moved to freeze Russian assets indefinitely, which is not yet the same legal status as confiscation, but is very close to it. In response to this move, the Russian central bank announced that it is filing a lawsuit against Euroclear, based in Belgium, where most of the Russian assets frozen in the European Union are held.
This is precisely why Belgium is seeking guarantees for its actions regarding Russian assets—it refuses to bear responsibility as a state for the decisions of EU representatives and would bear the greatest share of responsibility in a legal dispute.
Losing an international dispute would mean paying damages plus interest (and other costs, expenses, etc.), which, given the extremely high amount of assets seized and the current economic situation of the Union, would be at least the penultimate step towards financial collapse. The EU would face a reputational risk and would be in a weakened position in future disputes.
Outside of litigation, Russia would immediately proceed to confiscate the assets of the EU and its member states in Russia, including company assets, real estate, bank accounts, and investment funds. Russia would immediately revoke licenses and ban European companies from operating, and would proceed to ban or restrict exports of strategic raw materials. This step is certain, as Russia has declared it in advance.
It goes without saying that Russia's allies, such as India and China, which have extensive economic ties to Europe, may react in a similar manner.
International law would enter a period of uncertainty, and there would be only two possible outcomes: the creation of a new precedent (and global instability) or the condemnation of the EU and damage to its financial stability and reputation.
Both scenarios would be a disaster for Europe itself.