Suddenly, the subject has become urgent. Even though the European Commission had already begun to consider the matter in January, the American “betrayal” regarding Ukraine has completely changed the landscape. Calls are multiplying in all directions. As Europe urgently needs to rebuild its defence and provide armaments to Kyiv, abandoned by Washington, why forbid the confiscation of Russian assets frozen since 2023?

More than €200 billion from the Russian Central Bank’s reserves are blocked in European vaults, primarily in the Belgian clearing house Euroclear, as part of the sanctions taken after the expansion of the Russian invasion of Ukraine in 2023. European countries had decided not to touch this capital but to use the interest, in the name of respecting international rules.

Between €2.5 and €3 billion have been promised to Ukraine this year to help pay for its war effort. The French Defence Minister, Sébastien Lecornu, announced at the beginning of the week that he would use the interest from these Russian assets to provide an additional €195 million in military equipment to Ukraine.

All these manœuvres to maintain the appearance of respecting international law are no longer appropriate, according to many political leaders. “Enough talk, it’s time to act! Let’s finance our aid to Ukraine from frozen Russian assets,” declared the Polish Prime Minister, Donald Tusk, on 20 February. Since then, calls to “confiscate Russian assets”, previously mainly advocated by the Baltic states, Poland and Finland, have been multiplying everywhere.

Denmark is now in favour of taking the money to help a devastated Ukraine defend and rebuild itself. Germany, which until now had maintained a cautious position, is also changing its stance on the subject, as on so many others. It no longer excludes the seizure of Russian assets as war reparations.

“By All Means”

The debates have reached the European Central Bank. The apparent unanimous opposition of the central bank governors of the eurozone to confiscation, in the name of international law and financial system stability, is beginning to crack. The Governor of the Bank of Latvia, Mārtiņš Kazāks, was the first to break the taboo, stating that the confiscation of Russian assets is “a conceivable option to help Ukraine in its fight for freedom and against aggression”. Several officials from Baltic monetary institutions have supported him.

Meanwhile, France, Belgium and Italy continue to advocate for the greatest caution, in the name of international law and for fear of creating new shocks in an already severely shaken international monetary system. During his visit to Washington, Emmanuel Macron expressed his opposition to any form of seizure of Russian assets.

This position was confirmed a few days later by the Finance Minister, Éric Lombard: “France’s position is that these Russian assets [...] belong notably to the Russian Central Bank. We are not at war with Russia,” he explained, emphasising that such a provision would be “contrary to international agreements”.

It is in the name of this same international law that regimes considered close to Russian power, like Hungary, oppose any confiscation of Russian reserves, believing that such a gesture would deliver a fatal blow to Europe’s credibility and would only fuel the war.

Unsurprisingly, the debates in the European Parliament on 11 March about European defence followed the same dividing lines. Several representatives from the EPP (right-wing) and the Progressive Alliance of Socialists and Democrats advocated for strengthening European defence and supporting Ukraine “by all means”, including the seizure of Russian assets.

Others showed much more caution, invoking international law. A way, according to Aurore Lalucq (Place Publique), “to hide somewhat shameful positions”. “The first basic rule of international law is not to invade your neighbour,” she says.

An Unprecedented Situation

Even if they don’t openly acknowledge it, Europeans have already crossed many red lines in terms of respecting international rules since the beginning of the war in Ukraine. Until now, no country had dared to touch the foreign exchange reserves of a central bank placed abroad: even within the framework of sanctions, central bank assets were considered sacrosanct.

These reserves, consisting mainly of foreign currencies and gold, are meant to be used for commercial operations, foreign exchange operations, balancing the country’s balance of payments, maintaining its currency, and participating in the liquidity of the international financial system.

In one of its manuals on the balance of payments, the International Monetary Fund (IMF) recalls that “these external assets are at the immediate disposal and under the control of the monetary authorities”. By freezing more than €200 billion of Russian Central Bank assets – nearly half of its reserves – Europe has already swept aside one of the foundations of international treaties on the international financial system.

So why hesitate to go further? Because infringing even more on international law, particularly property rights, in the name of defending international law is a bit complicated. Since the unprecedented situation created by Western sanctions against Russia, international law experts have been endlessly discussing whether Europe has the right to seize these assets to help Ukraine finance its war.

Some believe it poses no problem, others judge on the contrary that the use of Russian assets must be reversible in case of a peace agreement. Some point out that while Ukraine can directly seize Russian assets to compensate for the devastation suffered from the Russian invasion, Europeans, who are only custodians of Russian assets and have not suffered damage, cannot. And certainly not to finance their military expenditure.

The legal uncertainty surrounding this issue prompts many jurists to recommend caution. Especially since no one knows how the future will unfold.

The End of Central Bank Immunity

Beyond the legal issue, the confiscation of Russian assets poses another threat: that of discrediting eurozone institutions and destabilising the financial system. This is the argument that the European Central Bank and its president, Christine Lagarde, have consistently developed to try to dissuade Europe from irreversible measures.

For more than a century, central banks have operated in a sort of club, cooperating and exchanging with each other, and ensuring through this network the balance of the system, the basis of monetary, financial and commercial exchanges. Currency loans, swaps, various financial instruments – they use all the tools at their disposal, sometimes even inventing new ones to respond to emergency situations or trying to contain crises, as in 2008.

“Suspicion risks taking hold, particularly regarding eurozone institutions.”

“Central banks being the ultimate source of liquidity, their actions are decisive in supporting confidence, addressing market dysfunctions and supporting credit for businesses and households,” recalls a recent report from the Bank for International Settlements. “Episodes of financial stress have also confirmed the importance of ensuring liquidity in foreign currencies, highlighting the need for cooperation between central banks,” it continues.

In this organisation, central bank assets placed abroad constitute one of the pillars of this cooperation. Touching them means saying that central banks no longer benefit, as before, from international immunity to ensure monetary management, a global common good, but can find themselves enlisted in other battles.

Suspicion risks taking hold, particularly regarding eurozone institutions, which might no longer be considered safe and reliable.

Euroclear, Dominant Player in the Immense Euro-Dollar Market

Because the majority of Russian reserves placed in Europe are deposited there, Euroclear has become the centre of all attention, an object of fantasy. There would be the hidden centre of resistance to the seizure of Russian assets, the explanation for Paris’s refusal, according to MEP Raphaël Glucksmann (Place Publique).

“Paris still refuses to seize the €209 billion of Russian public assets frozen in European banks. Why? Because Euroclear, the Belgian institution that holds the overwhelming majority of these funds, has the French Caisse des Dépôts as a shareholder. Our states have acted like carpet merchants. We have been too weak to have a decisive impact,” he said in an interview with Le Nouvel Obs.

The reflection plunged into perplexity, and sometimes hilarity, those who know Euroclear. “Euroclear, like Clearstream, is a clearing house, a technical infrastructure essential for central banks. We must resist the temptation to instrumentalise it, to make it a weapon,” explains a specialist in the monetary system.

Based in Belgium, Euroclear has become over the years one of the main players in the immense eurodollar market, holding the assets of external central banks and other financial actors, helping to ensure the functioning of markets, exchanges, and liquidity.

“The need to rebuild a monetary system more in line with the multipolar world is becoming increasingly urgent.”

A seizure of Russian assets risks mechanically calling into question the reliability of Euroclear. “If there is a confiscation, everything will have to move, including commitments and responsibilities,” warned Euroclear’s Director General, Valérie Urbain, imagining a scenario in which Russia would one day ask it for compensation for the damage suffered.

Even if they don’t talk about it, European leaders have another concern in mind: preserving the status of the euro as a reserve currency. At a time when more and more countries are challenging the predominance of the dollar in global exchanges, when Donald Trump, through his devastating policy and tariffs, is dealing a blow to the American currency, the need to rebuild a monetary system more in line with the multipolar world is becoming increasingly urgent.

The euro, which has already acquired the status of a reserve currency – about 20% of central bank foreign exchange reserves worldwide are denominated in euros – can play a role, alongside other currencies, and strengthen Europe’s role. Seizing Russian assets in this context is to run the risk of discouraging other countries, particularly from the South, from converting part of their reserves into euros, it is to participate in the Trump game where everything becomes a power struggle.

Russian Assets as Leverage

Should we, however, refrain from discussing the subject of Russian assets, from using it in resolving the Ukrainian situation? The first reactions, particularly Russian, show that the subject deserves to be raised.

If the question of the €200 billion of Russian assets, passed over in silence for more than two years, returns with such vigour in European debates, it is not only because of the American abandonment. It is also a way for Europeans to invite themselves into ceasefire negotiations between the United States and Russia from which they have been excluded.

Vladimir Putin makes no secret that one of his objectives in these discussions is, without making any other concession, to obtain the lifting of sanctions and to be reintegrated into the concert of nations. Donald Trump has already partially acceded to his request: he wants Russia to sit again within the G7.

By recalling the existence of frozen Russian assets and the possibility of confiscating them definitively, Europeans are waving a threat likely to frighten Moscow and bringing up the question of war reparations for Ukraine that both the Russian and American delegations seem to want to put aside.

“In this domain, missteps, unjust or unrealistic demands can have very heavy consequences.”

According to a World Bank report, at least €500 billion will be needed to rebuild this country devastated by three years of war. Considering himself victorious on the ground, supported by Donald Trump’s United States, Vladimir Putin has no intention of paying a penny to Kyiv.

Europeans don’t want Russia to get off so easily. Paris and other European capitals are seeking a compromise solution that would allow, while respecting international law, to guarantee war reparations to Ukraine no matter what. The solution would involve a kind of pledging of Russian assets to help finance the reconstruction of Ukraine. In the event that Russia does not pay the agreed war reparations, Ukraine would then be entitled to seize the €200 billion, shifting the responsibility for the situation to Moscow.

All this requires much precision and clarification. Because in this domain, missteps, unjust or unrealistic demands can have very heavy consequences. The precedent of the Treaty of Versailles reminds us of this. As for the financial world, it has an elephant’s memory: the question of the non-repayment of Russian loans in 1918 was only settled after a hundred years.

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Martine Orange

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