President Donald Trump’s return to the White House has completely shifted America’s stance on support for Ukraine, prompting European nations to consider new options to bolster military support for Kyiv.
Last month, the U.S. president blamed Ukraine for starting the war, called Ukrainian President Volodymyr Zelenskyy a dictator — even as Ukraine has been prevented from holding elections during wartime since Russia’s invasion in 2022 — and began unilateral talks with Russia in Saudi Arabia, to the dismay of Ukrainian and European officials who were not included.
Tensions escalated last week after a televised explosive clash in the Oval Office between Trump, U.S. Vice President JD Vance and Zelenskyy. The U.S. has since reportedly halted military support to Ukraine while an assessment of the situation is carried out.
European leaders are coming together to stand behind Ukraine amid the waning US support. One of the mechanisms Europe has at its disposal to make up the shortfall of American backing is to fully seize frozen Russian assets held in the region.
What are the Russian assets and where are they held?
Russia’s central bank has billions of dollars of foreign reserves. Roughly 300 billion euros ($322 billion) of these assets were frozen in the West after Russia’s full-scale invasion of Ukraine in 2022. Around 210 billion euros of these frozen assets are in the European Union. Most are held in Belgium, predominantly by the bank Euroclear, where 183 billion euros sit.
Given that a large portion of Russian state assets are on European soil, it is European nations’ prerogative to freeze but also seize these assets.
What could these assets be used for?
There has been much debate over the course of the war on whether these assets could be used to support Ukraine. In June 2024, the G7 agreed in principle to issue $50 billion in loans to Ukraine that were backed by the profits generated from around 300 billion euros of frozen Russian assets.
Since then European member states have refrained from pursuing full seizure of such assets due to concerns about legal and economic repercussions.
Recent escalation in tensions between the bloc and the U.S. has led the EU to explore more aggressive action, Bloomberg reported. The idea would be for a yet-to-be established International Claims Commission to demand reparations from Russia, and if they disagree, to fully seize them, Bloomberg reported citing people familiar with the talks.
Who in Europe is for and against using these assets to help Ukraine?
Several EU figures have expressed support for full seizure, including the foreign policy chief Kaja Kallas and the commissioner for economy Valdis Dombrovskis.
At the EU Foreign Affairs Council meeting at the end of February, Kallas stated that work on reaching an asset seizure agreement was “ongoing” and that “eventually, especially in the situation where we are right now, we all come to the conclusion that our taxpayers should not be the ones who are paying for this. It should come from the country that destroys Ukraine, which is Russia.”
Also toward the end of last month, U.K. foreign minister David Lammy told the British parliament that “Europe has to act quickly, and I believe we should move from freezing assets to seizing assets.” Estonia and Poland have also expressed support to seize assets.
In a statement published earlier this week, after reports of the U.S. withdrawing military aid, Estonia’s foreign minister pushed for Europe to step up: “Claims that there are no legal ways to use Russia’s frozen assets are unfounded. Last week, I shared a draft paper with our European partners, offering a clear solution for using frozen assets. Before the June deadline for extending the sanctions imposed on Russia, a political decision must be taken on using frozen assets”.
Nigel Gould-Davies, a senior fellow for Russia and Eurasia at The International Institute for Strategic Studies (IISS) told CNBC by email that, “many Central European states are sympathetic to the case for seizure, though are reluctant to say so publicly in the absence of a common EU position.”
Yet several states are apprehensive, and he particularly noted Germany and France as “the main hold-outs.”
This could now be changing, with the FT reporting both nations are open to discussing asset seizure.
How would these assets be seized?
In theory, all 27 EU member states could unanimously agree to seize Russian assets and “mandate Belgium to confiscate the assets,” Armin Steinbach, a Jean Monnet professor of EU law and economics at HEC Paris told CNBC.
The other option would be for Belgium to separately pursue asset confiscation if the EU sanctions expire without renewal, Steinbach said. However, Belgium seems unlikely to do so, as it has reportedly warned of the legal and economic risks that asset seizure poses to the euro zone.
Steinbach also commented that it would be “morally compelling but legally difficult” for Europe to seize Russian assets, as Europe is limited to taking countermeasures against Russia’s international law violations, which need to be “temporary” and “reversible,” according to international law.
Yet “at the same time, Ukraine has a damage claim against Russia to pay for the injuries of the war. The question is whether the EU could enforce this damage claim for Ukraine by confiscating Russian assets,” the professor said.
He referred to a “creative proposal” in which Ukraine transfers its “damage claim against Russia to the G7” who would then enforce this claim for Kyiv by “setting off” against Russian assets. Steinbach noted that “such a transfer has never happened under international law before” and that the issue of immunity protection for sovereign assets also persists.
IISS’ Gould-Davies noted that extensive studies by international lawyers demonstrated that “there is a safe legal path” to seizure, and that fears of economic repercussions were overblown.
“When the assets were first frozen — the moment that Russia lost access to them — there was no adverse impact on European economic or financial stability. There is no reason to think that markets, or individual creditor states, would act if Russia permanently and formally lost these assets,” he said.
What happens now?
With talks to end the war underway, and no current clarity on the potential outcome, Europe is still considering whether the seizure of Russian assets to aid Ukraine could allow for the purchase of additional weaponry, or whether such funds could help rebuild the country.
David Roche, a veteran investor and strategist at Quantum Strategy, said that as part of its discussions with the U.S., Russia will demand assets are unfrozen and returned to help boost its economy.
“There’s no doubt that Putin will want [them] back,” he told CNBC on Feb. 26, adding that Putin will look to make a deal with Trump, who could pressure Europe into unfreezing assets stored on European soil.
Russia also previously expressed it would retaliate should its assets be seized.
The withdrawal of U.S. support and Europe’s urgent need to step up defense spending “makes Russian asset seizure even rational and urgent” Gould-Davies said, asking, “Why not take free money from the aggressor?”