Three years into Russia’s full-scale war against Ukraine, Europe finds itself burdened with a staggering financial commitment. The European Union and its allies have already spent nearly $122 billion in direct aid to Kyiv, with additional billions funneled into military reinforcements and defense industry upgrades. Yet, amid mounting costs, the bloc remains hesitant to seize an enormous financial resource sitting right within its reach: the $229 billion in frozen Russian central bank assets.

While the EU has opted to use the interest from these frozen funds to back multi-billion-dollar loans to Ukraine, growing voices within Europe and North America are calling for a more drastic measure-outright confiscation. The United States and Canada have already introduced legislation enabling their governments to seize Russian assets for Ukraine’s benefit. France, too, has moved in this direction, with lawmakers passing a non-binding resolution urging the government to use the principal sum, not just the interest, to finance Ukraine’s military and reconstruction.

However, despite the momentum, significant legal, economic, and geopolitical roadblocks stand in the way of Europe taking such a step. The controversy surrounding asset confiscation is growing into a test of international law, financial stability, and Western unity.

At first glance, the logic behind seizing Russia’s frozen assets to support Ukraine appears straightforward: Ukraine is struggling, the West is paying an increasingly high price to support it, and the aggressor’s funds are conveniently immobilized within Western financial institutions. The interest on these assets-already being used to secure loans for Kyiv-is not nearly sufficient to meet Ukraine’s needs. If Europe wants to sustain its support for Ukraine without draining its own coffers, confiscating Russia’s assets seems like an attractive option.

But European leaders remain divided. French government spokesperson Sophie Primas explicitly warned against touching the frozen funds, citing fears that doing so could set a dangerous precedent that would discourage foreign investors from trusting European financial institutions. The concern is that nations like China, which could face similar sanctions in the event of a Taiwan invasion, might think twice before storing assets in Europe, potentially harming the euro’s standing as a global reserve currency.

Russia, for its part, had anticipated such risks and had already begun shifting official reserves away from the US well before the 2022 invasion of Ukraine. But Europe, once seen as a safer destination for state-owned funds, now faces a pivotal moment in determining whether it will maintain its financial reputation or wield economic power as a tool of wartime justice.

Beyond economic concerns, the most formidable obstacle to confiscating Russian assets is the question of legality. Freezing assets is one thing-under international law, it is a widely accepted tool used to impose economic sanctions. But seizing them outright is another matter entirely.

The principle of sovereign immunity, a cornerstone of international law, protects state assets from being seized by foreign governments. Historically, even during times of conflict, nations have been hesitant to breach this principle. As Frédéric Dopagne, a professor of public international law at the University of Louvain in Belgium, notes, the justification for confiscating Russian assets must be legally sound to withstand international scrutiny.

In the past, the United States has seized foreign assets in exceptional cases. After World War II, German assets were confiscated to compensate for wartime damages. More recently, Washington seized Afghan and Iraqi assets for post-war reconstruction efforts. Yet Europe has never taken such a step, making it a legally untested and diplomatically risky move.

To strengthen the case for confiscation, European leaders would likely have to argue that the funds would serve as reparations for Russia’s destruction of Ukraine and as a means to bolster Ukraine’s defense against continued aggression. The US has already adopted this approach through the 2024 Rebuilding Economic Prosperity and Opportunity for Ukrainians Act, which allows for the seizure of Russian assets to rebuild Ukraine. France’s recent parliamentary resolution initially included a provision to use Russian funds for Europe’s own defense but later removed it to strengthen the legal justification of supporting Ukraine exclusively.

Still, major European powers remain reluctant to act. Belgium, which holds the largest share of frozen Russian assets (around $193 billion), has been particularly skeptical. And while smaller EU nations may be open to the idea, any EU-wide action would require unanimous approval-a highly improbable scenario given the pro-Russian stances of Hungary and Slovakia.

Even if the legal and economic concerns were addressed, the geopolitical risks of seizing Russian assets remain high. Some officials in the Biden administration had hoped to use the frozen funds as leverage in eventual peace negotiations, forcing Putin to agree to a settlement in exchange for access to Russia’s reserves. With this strategy in mind, some argue that outright confiscation could backfire, reducing Western bargaining power and eliminating any potential diplomatic incentives for Moscow to compromise.

Meanwhile, the shifting political landscape in the US further complicates the situation. With Donald Trump’s renewed outreach to Moscow and the possibility of a Republican return to power, European leaders fear that an aggressive move against Russia’s assets could deepen divisions between Western allies rather than unify them.

Additionally, if European governments take the drastic step of seizing Russian assets without an ironclad legal framework, they may face retaliation from Moscow. Russia has already hinted at countermeasures, including seizing Western assets held in Russian territory or launching legal challenges that could bog down European financial institutions in prolonged disputes.

For now, it appears that Europe is not ready to cross the Rubicon of full asset confiscation. The European Parliament has passed a resolution endorsing the idea, but the actual implementation remains elusive. Without clear legal precedent, the support of key economic players like Germany, and a unified EU stance, any move toward full confiscation remains a long shot.

Instead, European policymakers may continue to rely on the strategy of using interest from the frozen funds to support Ukraine. This approach avoids legal entanglements while still ensuring that Russia’s resources contribute, in some way, to Ukraine’s defense and reconstruction.

However, as the war grinds on and financial pressures mount, European taxpayers will increasingly question how long they must shoulder the burden. If military support and reconstruction costs continue to rise, and if diplomatic efforts fail to make meaningful progress, the debate over outright confiscation may resurface with even greater urgency.

For now, though, Moscow’s frozen wealth remains locked away-not seized, but not returned either. Whether it ultimately becomes a tool for Ukraine’s recovery or remains a geopolitical bargaining chip will depend on Europe’s ability to navigate the legal, economic, and strategic risks that come with taking such an unprecedented step.

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Source: Weekly Blitz :: Writings