In the Russia-Ukraine war, a new chess piece emerged in Russia-Europe’s direction, and a new page of confrontation opens: What should be done about Russia’s Central Bank’s frozen assets? This question troubles European financial leaders. Some bureaucrats believe that confiscating Russian assets is associated with “high risks for the global financial system.”
What should be done with Russia’s Central Bank’s frozen assets, which are primarily denominated in euros and held in banks registered in the European Union?
Is there a chance to untie the Gordian knot? Or will hesitant and delayed decisions further complicate the situation?
In brief, shortly after the start of the Kremlin’s military operations in Ukraine, the G7 (“Group of Seven”) made a firm decision to freeze Russian foreign currency reserves valued at over 300 billion euros. These funds became inaccessible to Russia.
After much debate, in 2024, the G7 agreed to allocate the revenues (but not the assets themselves) from these assets to Ukraine within the framework of the ERA’s irrevocable loan program, totaling about 45 billion euros.
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Belgium’s Prime Minister Bart De Wever recently stated that confiscating Russian assets would be “a declaration of war,” posing “risks for the entire global financial system” and provoking Russian counteractions.
The question arises: Why can’t Europe use Russia’s Central Bank assets more aggressively and decisively to benefit Ukraine?
The G7’s decision last year was aimed at more stable transatlantic relations, but now, with changed circumstances, Europe must reconsider. Additionally, the risk of Hungary or Slovakia vetoing the continuation of the freezing of Russian assets for another six months only adds to the relevance of this issue.
Russians don’t want this money; Russians want this money not to be used by Ukraine.
Tom Keatinge, Director of the Centre for Financial Crime and Security Studies at RUSI, mentioned in his column for Politico that Ukraine is granted loans from the profits of frozen Russian assets, but the assets themselves are not touched, which is explained by legal and financial arguments.
According to statements by Christine Lagarde, President of the European Central Bank, and other leading Eurozone financiers, the disinvestment of Russian assets could create “legal risks” for Euro investments.
American lawyer, diplomat, scientist, and writer Philip Zelikow criticized the West’s handling of the frozen $300 billion in Russian assets in an interview with DW about their fate and his recent confidential proposal to several European governments.
Throughout his career, Zelikow worked in five U.S. presidential administrations—from Ronald Reagan to Barack Obama—and later was a strategic consultant in Joe Biden’s administration.
Philip Zelikow: “At this time, I think the risk of returning the money to Russia is low. I don’t believe that any key European country is inclined to return the funds to the Russian government. The risk is that the money will simply remain inactive and without the possibility of use. This is precisely Russia’s tactical goal. I don’t think they are expecting the return of these assets. Instead, Russians intend to engage in fruitless negotiations to prevent the money from aiding Ukraine. Russia’s tactical goal is to keep the money as far from Ukrainians as possible, as it gives hope to Ukrainians. Russia’s entire political mission is to convince Ukrainians of their hopeless situation.”
