How frozen Russian assets can be directed to support Ukraine without confiscation
Last week, information emerged that the European Commission is preparing to present a new mechanism for the use of frozen Russian assets.
At first glance, the idea is simple: instead of confiscating the entire capital, it would be replaced with EU bonds, and the proceeds transferred to Ukraine.
This approach could be a way forward for both the EU and Ukraine. It avoids the legal risks of direct expropriation while at the same time sending a strong political signal: Russia starts paying for the war right now.
Read more about the idea and its possible consequences in the article by Serhii Verlanov of the Dnistryanskyi Center (the former head of the State Tax Service (2019–2020): A €70 billion idea: what the EU’s new initiative on frozen Russian assets changes.
The total amount of frozen assets of the Russian Central Bank in the EU is about €200 billion. They are held mainly in the Euroclear depository in Brussels and Clearstream in Luxembourg.
The EU was only able to use the interest income from these funds, the so-called windfall profits. Their volume ranged between €3–5 billion per year and was directed mainly to servicing the G7 loan to Ukraine (ERA, Extraordinary Revenue Acceleration Loans).
Now the European Commission proposes to use the cash deposits at the European Central Bank linked to Russian assets to finance a Reparations Loan for Ukraine.
According to experts, over the next five years this scheme could generate between €50–70 billion for Ukraine.
In this case, Russia would remain the nominal owner of the frozen assets in the EU, but the actual liquidity would work for Kyiv.
This approach minimises the risk of undermining trust in the euro as a global reserve currency.
The key point is that this instrument would allow Ukraine to cover its annual budget deficit of €8-10 billion without direct pressure on the budgets of EU member states.
Thus, solidarity with Ukraine would no longer depend on parliamentary political cycles or populist waves. Assistance would become more predictable and less vulnerable to internal fluctuations in Europe.
In addition, the Reparations Loan could become a tool that gives the International Monetary Fund more confidence to launch a new program in Ukraine. Thanks to the European Commission’s idea, the IMF would see a stable and predictable source of external financing.
The mechanism, however, faces obvious challenges. Moscow is already preparing arguments that even substituting assets with bonds amounts to expropriation.
The likelihood of lawsuits in international arbitration and national courts is high. Another test will be the question of political unity: unanimous support of all EU member states is required to launch the scheme.
There is also a reputational risk for the European Union.
If other countries get the impression that the EU is ready to use foreign reserves under any pretext, this could undermine the trust of states that hold currency reserves in euros.
That is why it is vital for Brussels to prove that this is not arbitrary interference with property, but a clearly justified reparations mechanism based on international law and the principle of the aggressor’s responsibility.
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18 of September 2025
