The EU is today (and maybe tomorrow) discussing how to formally use the frozen Russian Central Assets to fund Ukraine

• Financial institutions and legal experts are warning against outright confiscation – as is Belgium, which is most at risk of Russian retaliatory actions
• The most likely outcome will be an agreement to use income from frozen assets to fund a loan to Ukraine and then to repay the loan from (hoped for) Russian reparations. Russia has ruled any such reparations as unacceptable
• Moscow has not previously retaliated to the confiscation of income (approx. $5 bln) but has now made clear it will start to take such actions (on a $ for $ basis) if the EU formalizes the confiscation of “Russian income or assets”
• It would mean that money now frozen in the I and C accounts in Russia would be targeted first. It is unclear whether the money owned by investors and companies in countries directly involved in the “confiscation process” would be targeted or whether all EU investors and companies would be held accountable
• The U.S. and UK would be expected to join in any action taken by the EU (and would be a possible target for reciprocal action on a proportionate basis) while Japan and Switzerland have not confirmed either way at this stage
• Only in the (now very unlikely) scenario where the EU decides to confiscate the underlying CBR assets, or a portion of it, would EU/UK/US corporate assets be at risk. This is unlikely under the (expected) scenario of a use of income
• Moscow is unlikely, in any event, to target any US assets because of the clear wish to strike a deal with Washington and to work with US strategic companies. That is not the case with most EU states or the UK

EU summit to formalise use of Russian frozen assets. The issue of the frozen Central Bank assets appears to be finally coming to a head at the EU summit in Brussels (today and tomorrow). The head of the EC, Ursula Von der Leyen, said this morning that no one will leave the EU summit until the issue of funding for Ukraine is resolved. This is despite the Hungarian PM saying that the issue cannot be resolved (he would veto any decision to confiscate money) and the Belgian Prime Minister again stated that while compromise is impossible on several provisions regarding the use of frozen Russian assets, on some other issues (not specified) a compromise is impossible.

"I can certainly compromise, but on a number of points that threaten the financial security of Europe and Belgium, this is impossible. To be absolutely clear: this is impossible," the PM stated to the media

IMF warns that time is running out for Ukraine. This is against the backdrop of a statement (this morning) from the IMF that Ukraine is on the brink of bankruptcy without substantial funding. According to the IMF, Kyiv it will need a total of 137 billion euros ($160 billion) in 2026 and 2027 and needs the funds by spring.

Backdrop

Moscow has not retaliated to income previously confiscated. The EU has been using income generated by the frozen Euroclear money to provide funding to Ukraine for several years. Despite statements from the Russian Finance Ministry that any confiscation of Russian money would be met with a similar ($ for $) response, so far Russia has not retaliated to the approximate $5 bln that the EU has transferred. The Russian government has, so far, differentiated between the money frozen in the G7/EU in February 2022 and the income earned since…the former is a red line while the latter has not been (thus far).

Action and Reaction

That is now about to change. But the EU is now discussing how to use the money to fund Ukraine and will either confiscate the money held in the EU or will lock it up indefinitely. Moscow views either option as a “theft” and will now retaliate. The process of retaliation has already started (see below), and very clear threats have been made about retaliatory asset confiscation.

The worst case is that the EU decides to confiscate all or some of the Russian money now frozen in Belgium and in other EU states (approximately $280 bln by consensus estimates – TBC). In this case, Moscow will grab a similar amount of EU assets .. starting with frozen I and C and then some corporate assets if the financial assets are not sufficient.

The other – and more likely option - is that the EU decides on a long-term freeze of the Russian assets so the EU can use the annual income to service a loan to Ukraine. The proposal is that the loan would then be repaid from the frozen assets as part of a reparation deal (for damage) agreed with Moscow. The Kremlin has rejected the idea of any sort of reparation deal.

This latter option would mean the confiscation of only the income generated by the frozen assets (not the underlying money) for an indefinite number of years. But, while Russia has not previously reacted to the confiscation of income, that would certainly change with this new approach by the EU.

I and C accounts would be used. The “annual loss” would be a smaller amount and, if Russia retaliates $ for $, the amount would be covered by the financial assets in I and C accounts. However, based on the initiation of legal actions by the CBR (below) and statements made by Russian officials, they would treat even this “confiscation of income on a longer-term basis) as a full confiscation and would retaliate

What it may mean for companies

EU companies potentially face the greatest risk (but it must be stressed this is based on worst case and threat made…what happens in reality will also depend on whether, and on what terms, there is a peace deal)

The financial assets in the I and C accounts are the most at risk and would certainly be targeted. Perhaps on a proportionate basis for all EU states or based on a proportion calculated on who has Russian assets in the EU. Currently Belgium is most at risk (close to $200 bln), followed by France (circa $70 bln), Austria (circa $15 bln) and Germany (circa $5 bln).

The UK would almost certainly participate in the actions agreed by the EU, and it currently holds approximately $25 bln of Russian assets.

The U.S. would also likely join the EU action – it has only $5 bln of assets frozen

Switzerland’s position is unknown at this stage – it holds approximately $8 bln

Japan also appears undecided – it holds approximately $55 bln

Compensation on a proportionate basis? So, based on what the Russian officials have been saying, if the EU, UK, and the US take the same actions, the Russia would target assets belonging to these countries, companies registered in these countries or citizens, on a proportionate basis to the money lost.

It is also unclear whether – despite threats to include countries not actually holding any Russian assets, e.g. Norway – the action to confiscate would be confined to those states actually holding Russian assets in Europe or to all EU member states by association.

What Moscow is saying

Actions and deliberate speculation. There have been some specific actions – the CBR initiation claim in a Russian court (below) – and a lot of (probably) deliberate speculation and threats made ahead of today’s EU summit.

Central Bank reaction. "The Bank of Russia reserves the right, without further notice, to proceed to the practical implementation of all available legal and other mechanisms to protect its interests in the event of further progress or any form of implementation of the aforementioned European Union initiatives under discussion," the Central Bank emphasized.

Special Representative Kirill Dmitriev stated that European authorities will face "consequences for illegal actions" If it were to permanently freeze Russia's assets. "This isn't just about Russia—it's about undermining trust in the global reserve system, the rule of law, and Europe's financial solvency. Panicking EU bureaucrats will face consequences for their illegal actions," Dmitriev said.

Timeline

On December 9, Russian presidential press secretary Dmitry Peskov stated that Europe would face serious consequences if Russian assets were seized. The Kremlin spokesman recalled President Putin's statement that the Russian government was involved in this matter. According to the press secretary, there is already an understanding of how to proceed.

On December 12, the EU Council approved an indefinite freeze on the assets until the end of hostilities in Ukraine. Previously, European countries voted to extend the freeze every six months. Approximately €210 billion in Russian assets have been frozen in the EU since 2022.

On December 15, the Moscow Arbitration Court received a lawsuit from the Central Bank of the Russian Federation against Euroclear for 18.17 trillion rubles. The Belgian depository holds €180 billion in frozen assets of the Russian regulator.

Why Moscow courts? The Central Bank explained its filing of the lawsuit against Euroclear in the Moscow Arbitration Court by the nature of the dispute over state property.

• The assets of the Bank of Russia are federal property in accordance with the Law "On the Bank of Russia," and therefore, the dispute with Euroclear falls under the category of disputes over property owned by the state of the Russian Federation. Therefore, according to the CBR, the dispute falls within the exclusive jurisdiction of Russian arbitration courts and is subject to review by the Moscow Arbitration Court.
• Euroclear's actions in complying with anti-Russian sanctions constitute culpable misconduct that has resulted in losses. Guided by sanctions against Russia and its citizens, Euroclear is receiving income from blocked Russian assets, the CBR stated. For the first nine months of 2025, interest income from sanctioned Russian assets amounted to €3.9 billion.
• Since February 2022, in accordance with EU Council regulations, Euroclear has been taking actions that make it impossible for the Bank of Russia to use and manage funds, securities, payments, and income on them.

Comments from the EU/G7

Belgium remains wary. The Belgian government has put forward several conditions to the European Commission for the use of blocked assets for a "reparations loan" to Ukraine. The key demands include coverage of potential legal costs in the event of Russia's disputes with any EU country, the rejection of new investment agreements with Russia by European countries, and the termination of existing ones. Belgium reportedly wants the guarantees to be "independent and autonomous, remaining in force even if the loan is declared invalid."

Belgian PM’s warning. The Belgian prime minister described the EU’s plan as a “a nice idea, stealing from the bad guy to give to the good guy. But stealing the frozen assets of another country has never been done.” He added: “Even during the second world war, we did not confiscate Germany’s money. In a war, you freeze sovereign assets. And at the end, the losing side must give up all or part of those assets to compensate the victors.” But, the PM stated, it was “a fairytale, a complete illusion” to “imagine that Russia will lose this war in Ukraine”. Moscow had “let us know that if the assets are seized, Belgium, and me personally, will feel the effects for eternity”.

British banks opposed the transfer. It has been reported (FT, citing sources) that UK banks expressed dissatisfaction with the government's plans to channel almost £8 billion in Russian assets to finance Ukraine. They fear serious legal risks.

Poland has little confidence of immediate action. Speaking at a press conference following a meeting in Berlin between the leaders of several European countries and President Zelenskyy, Polish Prime Minister Tusk said that "light years" would pass between the freezing of Russian funds and the potential use of these assets for the reconstruction of Ukraine or the provision of military support. He expressed confidence that no fundamental decisions on this issue would be made at the EU summit this week.