Using $300B in Russia’s Frozen Assets to Pay Ukraine War Losses

For nearly three years, European leaders have been debating how to unlock frozen Russian assets held in Western banks to support Ukraine’s defense and reconstruction efforts. Each time, the plan came close to a deal—only to stall just short of termination. Now, with Donald Trump back in the White House and American aid at a standstill, Europe is faced with a critical choice it can no longer delay.

The repair loan

European Commission President Ursula von der Leyen has is suggested a €140 billion “Reparations Loan” for Ukraine — secured by frozen Russian central bank assets held primarily in the Belgian Euroclear depository; The rationale is compelling: Russia’s invasion has caused severe damage, its stockpiles remain dormant under Western control, and Ukraine’s survival depends on new funding.

But Belgium, where Euroclear is based, is hesitant. Brussels fears it will be left vulnerable legally and financially if Moscow sues for expropriation. This dispute — over who bears Europe’s collective responsibility — has delayed the only policy that can keep Kiev solvent and sustaining support until 2026.

The freezing scale

Since Russia’s full-scale invasion in February 2022, the West has frozen about $335 billion in Russian state and private assets — cash, bonds, stocks, real estate, even yachts. Of this, around 200 billion euros belong to the Central Bank of Russia and are held in Euroclear accounts.

These bonds continue to pay coupons and mature, generating what Brussels describes as “windfall income”. By 2024, Euroclear had won 6.9 billion euros in annual interest from these encumbered holdings. The European Union has ruled that these windfalls do not count as state property and can therefore be taxed and redirected to Ukraine—setting a legal precedent for future transfers.

The legal tightrope – and precedents that matter

International law delineates two clear principles: first, a state that commits aggression must provide full reparation. Second, central bank assets are protected from seizure. Europe’s challenge is to reconcile these principles.

According to a legal road map of the Center for European Policy Analysis titled Seizure of Russian state assets for Ukrainethree complementary strategies can bridge this gap. The first concerns the redirection of windfall profits from frozen Russian reserves. The second proposes using these reserves as collateral for loans to Ukraine. The third strategy would be to enforce international court orders against non-immune Russian property.

All three depend on temporary, reversible measures under the International Law Commission’s Articles on State Responsibility—meaning they would deny Russia access to its stockpiles without confiscating them outright. Legal precedent in the case of Armed Activities in the Territory of the Congo supports this reasoning. The 2005 judgment of the International Court of Justice and multiple cases of the European Court of Human Rights confirm that states can impose lawful, time-limited restrictions in response to serious violations of international law.

Belgium’s fear of being left alone

Belgium’s concern is clear: if Russia sues, Belgian taxpayers could end up paying. Germany’s new chancellor, Friedrich Merz, proposed a collective solution — diffusing any legal responsibility across all EU members. In practice, a joint liability fund or EU-backed guarantee mechanism would protect Belgium while maintaining a deterrent effect against Moscow.

Such a step would turn a unilateral act into a multilateral countermeasure—essentially a multilateral reparations agreement that would be legally stronger than the UN Charter and customary international law alone.

Sovereign Immunity and Investor Confidence

Critics warn that the seizure of state assets could reduce investor confidence in euro-denominated securities. However, the Reparations Loan model avoids this issue. The assets themselves remain tied up. they merely serve as collateral to support loans to Ukraine.

When Russia ends its aggression and pays reparations — in accordance with UN General Assembly resolution ES-11/5 — the security can be released. This is a temporary, reversible measure, not a confiscation.

Furthermore, the windfall generated by Euroclear is clearly not Russia’s property. They only exist because the sanctions froze the underlying securities. Taxing and redirecting these profits is akin to taxing income earned under EU jurisdiction – not expropriating foreign wealth.

Economic and Strategic Accounting

Skeptics argue that weakening state immunity could threaten the status of the euro’s reserve currency. However, the EU’s own fencing rules offer sufficient legal guarantees.

Meanwhile, the G7’s Emergency Acceleration of Revenue (ERA) framework reinforces multilateral legitimacy and the CEPA model legislation—the Law on Extraordinary Revenue and Legal Redistribution of Ukraine— develops harmonized internal statutes with sunset clauses and transparency rules. Together, they show that Europe can adapt the rule of law to modern warfare without undermining it.

A mirror image of Russia’s behavior

Moscow’s moral position in this debate is non-existent. In 2022 and 2023, the Kremlin expropriated Western assets under its “unfriendly nations” decreesseizing stakes from BP, Carlsberg and others directly. These actions violated international investment treaties and broke Russia’s claim that its own reserves abroad must remain inviolable. If Russia can fund its war machine by stealing Western assets, the West can legitimately support Ukraine’s defense by reallocating frozen Russian reserves. Moral balance isn’t even close.

The Tipping Point: From Freezing to Flowing

After years of legal battles, a breakthrough appears imminent. In June 2024, the G7 agreed to lend Ukraine $50 billion, backed by frozen Russian central bank assets. Repayment will come from the windfall generated by these reserves—about €3-5 billion each year. As previously reported, Brussels and the G7 are close to finalizing a wider deal – one that could provide up to €140 billion in future reparation loans backed by the same frozen reserves. Euroclear’s holdings remain untouched, but interest income will cover Ukraine’s debt and aid reconstruction. In effect, Russia will begin to pay for its own war crimes through legal, reversible economic mechanics.

This framework — by von der Leyen Repairs loan— is Europe’s clearest moral and strategic innovation since the Marshall Plan. It offers predictable funding, adheres to legal constraints and imposes real consequences for aggression. It is also almost complete. The political agreement is expected to be finalized before the end of the year, with disbursements starting in early 2026.

The global context — and America’s absence

The geopolitical message is clear. With the United States retreating under Trump and cutting off new aid, Europe has been forced to take the lead. Canada and Japan have shown cautious support, but this is now a European-led effort. For the first time, Brussels – not Washington – is dictating the terms of wartime economic leadership. It marks an important turning point. For decades, Europe’s “strategic autonomy” was mostly empty rhetoric. Today, it is a tangible reality — based on legal measures, financial commitments and moral resolve.

From Law to Justice

This discussion has never been solely about finance. It is about whether the international legal order still commands respect in the face of blatant aggression. The emerging compromise—a collective European liability structure coupled with legal asset use—demonstrates that the rule of law can evolve without compromising principles.

As von der Leyen stated, “Russia must pay for the destruction it has caused.” This idea, long overdue, is now finally being implemented.

Europe’s moment of truth

The European Union was founded to prevent another war on the continent. Allowing Russia to exercise an unchecked would betray that purpose. While Belgium’s caution is understandable, the answer lies in collective responsibility. Common responsibility, common purpose and common courage are what this moment calls for. Acting together, Europe can turn frozen Russian wealth into Ukraine’s lifeline and demonstrate that justice, not impunity, still underpins the global economic order.

The bottom line

Europe’s near-final deal to seize Russian frozen assets marks a major shift in geopolitical relations. The move would unlock 140 billion euros in funding, boost Ukraine’s economy until 2026 and assert Europe’s global leadership as the US declines in influence. For investors and policymakers alike, the message is clear: the rule of law is moving forward, and the financial system that once protected attackers is now being reformed to hold them accountable.