The idea of using frozen Russian assets to aid Ukraine has been circulating for several years. During that time, an agreement has almost been reached a number of times, only to by nixed by unexpected obstacles. Now Europe appears to have agreed to provide Kyiv with a “reparations loan” secured by Russian assets—but is unable to implement that plan due to resistance from Belgium.
Since the start of Russia’s full-scale invasion of Ukraine in February 2022, Western countries have frozen Russian assets, both private and sovereign, including bank accounts, securities, real estate, yachts, and much more. Estimates of their total value have varied, but it’s believed to be at least $335 billion.
The fate of private assets varies: some remain frozen, some have been seized for sanctions violations, and some have been transferred to Russia via legal proceedings or exchanged for assets in Russia. But they represent a small fraction of the total frozen assets. The main stumbling block remains Russia’s sovereign assets: those owned by the central bank—Bank of Russia—which are protected by both the law and established practice.
Before the war, the Bank of Russia invested its foreign exchange reserves in reliable foreign securities, most often government and corporate securities with high ratings. If the client is a resident of another country, they need to open an account with a depository to purchase, store, and service securities. This is how European depositories came to hold accounts for the Bank of Russia, major Russian banks, depositories, and Russian brokers.
Similarly, European banks and depositories opened accounts in Russia to service clients investing in Russian securities. But with the outbreak of war, the bridge between Russian and Western depositories was destroyed by sanctions, and the accounts were symmetrically frozen.
The bulk of the Bank of Russia’s assets are in accounts at the Euroclear depository located in Belgium. At the start of the invasion, these accounts held assets worth over 200 billion euros belonging both to the Bank of Russia and to private Russian individuals who purchased foreign securities through brokers who held them in their own accounts.
Much smaller sums were held in Luxembourg, France, the UK, and Switzerland, and even smaller amounts in the United States, Canada, Japan, and elsewhere. Soon after the funds were frozen, a major debate began over the possibility of using them to aid Ukraine.
Since most of the Bank of Russia’s funds were invested in bonds, they earned coupon income and gradually matured. Under normal circumstances, that income would have been deposited into the Bank of Russia’s account, which would have invested them in new securities. But sanctions prevented the transfer of the funds, so they gradually began accumulating in Euroclear accounts as a liability.
It didn’t take Western countries long to make a political decision that these sovereign assets would remain frozen and that Russia would not get them until there was peace in Ukraine and reparations issues had been resolved. When it came to practical implementation, however, calls from the United States, Canada, and the UK to withdraw Russian funds met with opposition from the European countries that hold the bulk of the funds. Their main argument, supported by the European Central Bank, was that withdrawing Russian funds would discourage foreign investors from investing in euro-denominated assets (though Russian assets have been frozen for several years now, and there has been no outflow).
As a result, an intermediate option was chosen: not to use a frozen account itself, but the interest income from it. Euroclear holds available balances in a non-interest-bearing account owned by the Bank of Russia, converting them into interest income through overnight loans. The funds themselves, however, remain Russian and inaccessible to Russia.
The high interest rate and large volume of funds means that several billion euros accumulate annually, which the Belgian government then collects through a special tax and transfers to Ukraine. In 2024, the income from interest amounted to 6.9 billion euros.
But Kyiv needs about $100 billion a year, and Trump’s return to power, the ongoing war, interest rate cuts, and the rise of parties opposed to the European establishment have escalated the problem to a new level. With Trump having closed the U.S. checkbook, all the costs are falling on Europe and a few other Western countries.
Neither the IMF nor the EU has sufficient funds to compensate for the U.S. withdrawal from the ranks of Ukraine’s donors. Accordingly, the EU returned to the issue of Russian assets in the summer of 2025. In September, European Commission President Ursula von der Leyen spoke of the need to utilize Russian assets into a Reparations Loan for Ukraine. She said the risk would have to be carried collectively by EU countries, and that Ukraine “will only pay back the loan once Russia pays for the reparations.”
In late September, German Chancellor Friedrich Merz reversed the country’s previous opposition to confiscating Russian assets and called on European countries to provide Ukraine with an interest-free loan of 140 billion euros. The loan could only be used to purchase weapons, not to replenish the Ukrainian budget. Frozen Russian assets will serve as collateral, but that will not affect property rights, Merz wrote.
The implementation of this idea has seemingly so far stalled on the issue of distributing financial and legal liability. Belgium wants to distribute liability across all countries, fearing being left alone to face lawsuits and a potential hole in Euroclear’s capital.
Those fears are not without grounds. The proposed scheme would give Russia the opportunity to replenish its budget with Western assets while simultaneously dealing a financial blow to Brussels.
Back in 2022, in response to sanctions, Russia partially froze foreign assets on its territory to stem capital outflow. Foreigners from “unfriendly”—i.e., Western—countries lost the right to sell their assets in Russia. Russian Finance Minister Anton Siluanov has said that there are more foreign assets in Russia than Russian assets frozen in the West, but their total volume is unknown.
A telling example is BP, which announced back in early spring 2022 that it was selling its 20 percent stake in Rosneft and relinquishing its co-ownership of the Russian oil major. But the sale was blocked by a Russian court, so Rosneft continues to put aside a fifth of its net profit for BP. Since 2022, about 340 billion rubles (about 3.4 billion euros) should have accumulated, judging by the company’s reported profits and dividend distribution practices. That amount is worth about 0.17 percent of Russia’s GDP.
Similar accounts in Russia effectively hold frozen coupon payments, bond redemptions, and dividends accruing to Western investors. Most of them, like BP, have written off these funds and don’t include them in their financial statements. Some count 20–30 percent of the value. Some have managed to get their funds by hook or by crook.
While EU ministers were discussing the possibility of using the interest income on the Bank of Russia’s account, President Vladimir Putin signed a decree setting a breakneck pace for the sale of assets nationalized by the state from holders in “unfriendly” countries. The decree appears to be preparation for nationalization and subsequent sale, or a threat to do so as a retaliatory measure.
Transferring dividends and coupon payments from these accounts to the Russian budget would provide some much-needed relief for the beleaguered Russian budget. In other words, transferring funds to Ukraine could have the unintended effect of indirectly boosting Russian military spending.
But that’s not what is worrying Belgium. Russia could also nationalize the accounts of foreign depositories—first and foremost, Euroclear. Those accounts are blocked, but payments on securities held in them are being made.
The size of these accounts has not been disclosed. The latest available data are from early 2023, when they held about a quarter of a trillion rubles. Since then, some of the funds have effectively been exchanged for frozen Russian accounts in Europe, and in other cases, their foreign owners have managed to withdraw some of the funds.
On the other hand, dividend payments, coupons, and redemptions have been paid into the accounts. While clients’ securities aren’t held on the balance sheet of the European depository or a bank whose accounts are blocked in Russia, the funds must be accounted for. This means that their withdrawal creates a hole in the account holder’s capital. Even if it’s not a critical amount, this problem could in itself prompt clients to withdraw funds and assets.
This is one of the reasons why Belgium wants to secure collective liability guarantees. Otherwise, the Belgian authorities will have to deal with Euroclear’s capital shortfall on their own.
Ultimately, given the lack of funds to support Ukraine, the adoption of some sort of scheme to appropriate Russia’s assets seems all but inevitable, despite the risks for Euroclear and the potential benefits for the Russian budget.
The process could be derailed in the event of an abrupt change in Trump’s position on funding Kyiv or a sudden end to the war. And of course, the EU still has to agree within itself on collective responsibility. But the stakes are very high, because if these efforts fail, it will not just be Ukraine that is at risk, but the very raison d’être of the EU.
