The poisoned chalice of Russia’s frozen assets

Russia’s frozen assets are currently poisoning EU politics: the dilemma besetting Europe is whether to break the taboo or not. Seizing them would be a transgressive act, with unpredictable financial and strategic consequences. But as other sources for financing Ukraine are drying up, liquidating them is fast becoming irresistible for cash-strapped European governments. ‘Just take them and move on with it’ – the view initially held only by the Baltic States and Poland – has become mainstream, not least after German Chancellor Merz rallied to the cry in late September.

A subtle legal scheme must convince markets that this is not pure and simple confiscation but that ‘property rights’ are formally protected; it involves drawing down a €140 billion ‘advance’ on war reparations that will be due from the Russian Federation once the conflict is over, via a special purpose vehicle backing interest-free loans to Ukraine. In case this legal ‘solution’ does not dispense with all doubts regarding the operation’s wisdom, a moral argument is the trump card: ‘Stealing from the enemy, a murderous regime – does that really count as stealing?’

Among EU member states, it has fallen to Belgium to voice concerns. Not because the country is more scrupulous than its peers, but because the stakes for it are higher, as €180 bn of Russian central bank assets are being held by the Brussels-based company Euroclear. Belgium feels isolated and exposed to Russia’s wrath. At October’s EU summit, Prime Minister Bart De Wever vetoed the operation until his conditions for risk-sharing are met; it will be discussed again by the 27 national leaders in December. In the meantime, the European Commission is trying to work out a solution that is acceptable for Belgium.

To proponents of the idea, it is straightforward. In an act of economic statecraft, the EU would use the financial leverage at its disposal to punish the Kremlin and support Ukraine. The amount is such that it could bankroll Ukraine for two full years, until late 2027, by which time a ceasefire or settlement between Kyiv and Moscow would hopefully have been reached.

On foreign affairs grounds, it appears to be a clear win-win. It is no surprise that EU High Representative Kaja Kallas supports the idea, as did her predecessor Josep Borrell. In her post-summer State of the Union speech, Commission president Von der Leyen first made the case for using the immobilized Russian assets as back-up for a reparation loan to Ukraine.

However, the European Central Bank has warned that confiscation would pose risks vis-à-vis the status of the euro as an international reserve currency. The debate is taking place just as the ECB President is pushing for the euro to become the new global reserve currency, using the rhetoric of geoeconomics and great power competition. In an op-ed published in June 2025, Lagarde argues that the ‘global euro’ moment has arrived and must be leveraged. For that, three conditions must be fulfilled: ‘geopolitical credibility, economic resilience and legal-institutional integrity’. The latter is clearly at odds with the potential seizure of Russian assets. According to the Belgians, not even Germany’s assets were confiscated during the Second World War.

In principle, these arguments about Europe’s currency and the investment climate are the same as two or three years ago; they are the reason why Germany, France and other member states opposed any variant of confiscation until recently. But the politics have since changed, and today these concerns hold less weight. The US government is no longer supporting Ukraine financially, and European governments are themselves running out of money. The French and Belgian governments are currently incapable of passing budgets that sufficiently reduce their sizable deficits and avoid mass street protests. Footing the bill for Kyiv will not make them popular. The tension now is between warfare and welfare.

Merz’s U-turn was more surprising, as Germany has ample budgetary space and used to be a staunch defender of the euro’s integrity. But the new Chancellor seems unafraid of action or of breaking financial taboos in times of war. He has already supported an end to the constitutional debt brake, sacred in his own CDU party, to allow more defence and infrastructure investment. It is reminiscent of Angela Merkel’s agreement in May 2020 to the French idea of joint borrowing, after she had repeatedly said ‘No’, in response to the Covid-19 emergency.

In an ironic switching of roles, on the question of assets Paris seems more cautious than Berlin. President Macron may fear that French banks (supposedly holding €23 bn.) will come under pressure to seize Russian assets. British banks, which hold in the tens of billions of immobilized private and public Russian funds, will have heard De Wever’s complaints about being singled out: ‘The fattest chicken is in Belgium, but there are other chickens around. Nobody ever talks about this.’

All of this echoes some tense episodes of the euro crisis, with Greece on the brink of bankruptcy and EU national leaders fed up of asking their taxpayers to jump in again. Then, too, they went after new sources of cash that could be painted as (slightly) immoral – greedy bankers. During a memorable 2011 EU summit, French president Sarkozy and Merkel sat down with two spokesmen from the financial sector for a brutal ‘take-it-or-leave-it’ session. The US bankers took the deal: a limited ‘haircut’ on their Greek portfolios rather than the full shave. Then too, EU leaders did not heed the warnings of the ECB, which feared financial turmoil and loss of credibility. Back then, international investors went to court to plead their cases, arguing the haircut was unlawful. There is a fear the Kremlin and Russian oligarchs could do the same in future and find grounds in EU or international law.

Inevitably Belgium will be pushed into agreement, once a risk-sharing mechanism is found. But alongside the financial risk, the country also faces a variety of security threats. The recent flurry of drone incursions into its airspace has been linked to Brussels being the headquarters of NATO but also to the Russian asset story. Coincidence or not, in the week after the EU summit and Belgium’s veto, Bart De Wever received NATO Secretary-General Mark Rutte.

Is there another way out of the dilemma? Two Norwegian economists propose to offset the problem of Europe’s weak public finances by relying on Norway’s credit rating, which is the highest in the world. Their moral rationale is that Norway, a non-EU neighbour, has profited from the war in Ukraine through sales of gas to the EU at much higher prices. Extending a guarantee would offer Oslo redemption by ‘finally’ contributing to the war effort to an extent commensurate with its own means. Danish Prime Minister Mette Frederiksen applauded the idea.

If Mark Rutte wants to help Belgium and the EU, he should place a call to Jens Stoltenberg, his NATO predecessor, who currently happens to be Norway’s Minister of Finance.