Europe’s frozen asset plan
As the economic warfare on Russia continues, the European Union tried in effect take Russian funds and send them to Ukraine. More than $339.3bn in Russian assets have been frozen by Western countries since the 2022 conflict in Ukraine started, with the EU holding $247bn of this. Belgium holds the largest share at $210bn.
In the end, the European plan to take Russian assets did not work out. Instead, $106bn will come from an interest-free loan provided by 23 out of the 27 EU member states. Hungary, Slovakia and the Czech Republic were granted an exemption in order to allow the deal to pass following months of debate.
It is estimated that Ukraine will require an extra $159bn over the next two years, if it is to avoid bankruptcy as soon as April, leading the European Commission to put forth a plan to tap into some of the frozen Russian central bank assets held by the bloc. But Belgian Prime Minister Bart De Wever had refused to sign off on this without ironclad guarantees that Belgium, where most of the Russian assets are held, would be protected from potential Russian legal retaliation.
Belgium estimated it could be left owing billions of euros if Moscow successfully sued Euroclear, a Financial Market Infrastructure (FMI) provider in the Eurozone, where the funds are held. Hungary and Slovakia had also expressed strong opposition to the plan.
Russian President Vladimir Putin has said that using frozen assets to finance Ukraine would be akin to theft. In this case, it seems that Putin is correct and that is why the EUs plan did not work out.
The EU also has the plan that Russia will pay reparations to Ukraine and to Europe after the conflict is finished. Maybe Europe did not learn from the Treaty of Versailles as it seems absurd that Russia would pay anyone anything. Despite this, losses from the conflict are estimated at about $524bn in reconstruction costs, according to the European Parliament.
Besides Belgium, a number of EU members opposed the plan, with Belgium raising concerns that using the frozen assets without strong EU guarantees is fundamentally wrong. It warned that Moscow could retaliate by targeting Belgian property in Russia, while Russia-friendly countries could also lodge legal claims against Euroclear. This also seems to add issues to the existing problems and tapping into Russian assets risked further escalating the conflict in Ukraine.
While Russia is the most prominent non-European country with significant assets frozen in Europe, several other nations outside Europe are also subject to asset freezes under the EU sanctions regimes. While Russia’s situation is unique because the EU has frozen its Sovereign Central Bank reserves, most other countries on this list primarily have assets belonging to government officials, oligarchs or specific state-owned companies frozen, rather than their entire national reserves. According to the European Commission’s sanction tracker, the EU has imposed asset freezes and a prohibition on making funds available in at least 31 countries. Many of the moves are mandated by the United Nations, and then implemented by the EU, while other asset freezes come directly as a result of EU decisions, including those on Venezuela.
In 2017, the EU froze assets of Venezuelan entities and individuals in response to the breakdown of democratic rule and human rights abuses in the country under President Nicolas Maduro. It specifically targeted individuals committing serious violations, and the European Council only recently extended these measures until January 2027.
The U.S. typically freezes assets via the Specially Designated Nationals (SDN) List. According to the Treasury’s Office of Foreign Assets Control (OFAC), which catalogues different levels of sanctions, the U.S. has almost fully frozen the assets of the governments of four countries, including Cuba, Iran, North Korea and Russia. In June this year, U.S. President Donald Trump issued an Executive Order removing US sanctions on Syria.
It seems that the brain behind the reparation idea was the anti-Russian German Chancellor Friedrich Merz, who had initially floated the reparations loan idea in an opinion article in the Financial Times in September. In the end of the day, it was not only opposition from Hungary, Slovakia and the Czech Republic, but what really stopped the grabbing of Russian assets was the opposition of the Italian Prime Minister Giorgia Meloni. Once her opinion was clear, just an hour of discussion was needed before the leaders unanimously agreed on plan B, the loan. In a small, and bizarre, concession to Merz, they agreed to continue working on the possibility of linking the Russian assets to the loan should Moscow refuse to pay reparations. Europe continues to be delusional about the Ukrainian situation and in the end, they will likely suffer economic consequences.