Overview
As the EU negotiates a 17thsanctions package on Russia, it is considering ways to insulate some €260 billion of immobilized Russian sovereign assets under its control as a form of leverage in negotiations. The EU’s previous course of action—simply holding these assets in depositories like Euroclear—may be challenged by a Hungarian veto on renewing the EU’s Russian sanctions or unilateral concessions made to Russia by the US, if it continues its bid at diplomatic normalization. If compelled to protect its holdings of immobilized Russian assets, the EU risks international flight from the euro and its denominated assets, increasing borrowing costs and putting pressure on the entire European economy.
Depositories holding immobilized Russian assets, such as Euroclear, risk losses from potential seizures of its managed cash and from potential litigation from Russia, who was owed the interest on its prewar assets. Financial institutions may reconsider how to price financial risks and improve due diligence practices in an age of geoeconomic fragmentation.
Who Controls the Immobilized Assets?
Most immobilized sovereign Russian assets are held by the Belgian security depository Euroclear (€180 billion), which facilitates foreign currency transactions. This is about two-thirds of the total immobilized Russian assets, predicted at $300 billion.
The Central Bank of Russia, like other foreign exchange institutions, held securities in the form of bonds—an IOU with interest on lent money to another government. Once bonds reach their maturity date, they convert to a bank deposit—a debt owed to the depositor, in this case, the Central Bank of Russia, by the securities depository that holds Russia’s assets, such as Euroclear (which holds about two-thirds of immobilized Russian assets abroad). Almost all these bonds have matured into deposits and are converted into their denominated currency, such as euros or US dollars. This conversion requires the issuing country to transfer cash from banks within their jurisdiction to Euroclear—a step that is currently blocked by sanctions but recorded on Euroclear’s ledgers as an asset. So, although Euroclear holds most of Russia’s immobilized deposits, the EU only controls what happens to the portion comprising euros (65% as of Q3 2024), as opposed to the UK controlling the pound sterling (17%), Canada its dollars (8%), and the US its dollars (7%). Of the assets held in Euroclear alone, as of Q3 2024, it is predicted that the EU controls $131 billion, the UK $34.3 billion, the US up to $40.2 billion, and Japan $29.1 billion, among others—underscoring why a unified G7 response is vital.
Meanwhile, freezing Russian assets put depositories like Euroclear in limbo: they still must manage the cash to theoretically pay back the interest owed to Russia, but Russia is unable to withdraw. The EU Legal Service decided near the beginning of the war that Russia is only owed the principal and Euroclear can keep the interest, resulting in windfall profits. Euroclear earned $7 billion in interest frozen Russian cash in 2024 alone. Russia, thus far, has not challenged the European expropriation of profits in court.
Although the G7, primarily at the behest of Europe, has hesitated to outright seize Russian assets out of concern for the euro’s stability as a reserve currency, they agreed in June 2024 to utilize the windfall profits from Euroclear’s interest to secure $50 billion in loans to Ukraine. They have also pledged to keep Russian assets immobilized until Russia compensates Ukraine for war damages—which are estimated to be far higher than the $300 billion in assets, effectively keeping them frozen for the medium to long term or acting as a future credit against Russia’s total agreed obligations to Ukraine.
The Politics Behind Frozen Assets
Russia seeks reintegration into the global financial system. It has weathered the West’s punishing sanctions regime through a mix of capital controls, sky-high interest rates (21% as of February 2025), an overreliance on the defense industrial base for GDP growth, and a 60% depletion of its sovereign wealth fund as oil revenues continue to drop due to the G7 price cap. The return of some $300 billion assets would provide needed relief as Russia confronts the transition from a wartime to a market economy. Russia has demanded financial relief as a gesture toward a ceasefire, which most of Europe sees as a nonstarter. Notably, Russia conditioned a now-defunct Black Sea ceasefire on the reintegration of its state-owned Agricultural Bank into the SWIFT payments system, and it has recently approached the Trump administration about using frozen Russian assets to pay for Boeing planes and replenish an aging domestic airline fleet.
Russia’s plea for the return of assets may fall on deaf ears. In April 2024, the US Congress passed the Rebuilding Economic Prosperity and Opportunity for Ukrainians (REPO) Act, which requires the President to keep Russian assets immobilized for the duration of the Russia-Ukraine war and transfer assets subject to US jurisdiction only for the express purpose of rebuilding Ukraine, ideally in conjunction with G7 allies. This will constrain the Trump administration’s ability to use Russian assets as a bargaining chip, if it even intends to do so: months of stalled diplomatic progress could be followed by a pivot to a pressure campaign against Russia to end its occupation of Ukrainian territory.
EU member states, while steadfast in preventing the return of Russian assets (except perhaps Hungary), remain divided on whether to confiscate assets outright. Belgium, which oversees Euroclear, vocally opposes a seizure, arguing that confidence in the euro would shatter, carrying a host of unpredictable secondary effects that bring systemic financial risks: foreign governments fearing retaliation could accelerate participation in non-Western payments systems, refrain from holding US Treasuries and Eurobonds, or regulate future capital flows.
The Current Situation May Be Untenable
G7 allies may be diverging in their approach to Russia’s frozen assets. If so, the current approach to hold Russian assets in depositories as a form of leverage may be updated, introducing uncertainty in the West’s sanctions regime.
First, if the US continues to pursue unrelenting diplomacy with both Moscow and Kyiv, it could seek to unilaterally return some or all the immobilized Russian assets it controls. Although REPO requires assets to be used for the reconstruction of Ukraine, the Trump administration could try to interpret Ukrainian territory under Russian occupation or projects under an emerging minerals deal with Kyiv as legitimate uses—especially if outlined in a peace agreement signed by Ukraine.
Second, the EU’s immobilization of Russian assets, which must be renewed alongside other Russian sanctions every six months, could be vetoed by Hungary in July. Hungary has traditionally used each sanctions renewal to dance with other EU member states to extract concessions, but it could finally exercise its veto rights in an ostensible effort to support diplomacy with Moscow. If EU member states fail to maintain sanctions, then the $50 billion G7 loan to Ukraine—$20 billion paid in by both the US and the EU and the remainder from other G7 states—would not be secured against anything, yielding a loss to each lender.
These two factors may push the G7 to change their approach, introducing policy uncertainty. EU member states, led by Belgium (where Euroclear is located), could introduce their own unilateral sanctions, but this would create additional diplomatic inertia for future negotiations. If international courts greenlight a legal seizure of assets for compensation to Ukraine, EU member states could confiscate assets outright before sanctions expire, but this is not a guaranteed outcome and comes at the expense of the G7’s negotiating leverage with Russia, potentially undermining a durable ceasefire or meaningful reparations.
Some G7 members have discussed transferring immobilized assets to a holding vehicle where they can be reinvested or accrue interest, allowing Russia to theoretically collect the principal after compensating Ukraine. The fund would simplify accounting of immobilized Russian assets (roughly a third are not managed by Euroclear) and could take the model of a trust, with governments acting as trustees that negotiate the best forms of compensation to Ukraine and potentially to depositories like Euroclear, who may face litigation risk. Holding assets in a fund would likely be more profitable than skimming revenue from depositories like Euroclear.
The Risks
The seizure of Russian assets, even if found legal by international courts, carries unpredictable systemic financial risks: while there is a precedent of the US seizing Iraq’s sovereign assets after it invaded Kuwait, the EU has never done so and is not a direct party to the Russia-Ukraine war. Proponents of seizure argue that Russia must be punished for breaking international law and fears of financial fragmentation are overblown. Alternatives to Belgium-based SWIFT have struggled to lift off, and the dollar and euro together comprise over three-quarters of global currency reserves. Opponents, who include ECB manager Christine Lagarde, worry that a seizure could nonetheless cause a sell-off of the euro and its denominated assets, risking an increase in eurozone borrowing costs to finance debt and a return of austerity measures to reduce inflationary pressures, which is already increased amid an emerging global trade war. This could lead to a GDP contraction and a constrained investment environment for the entire European economy.
Legal risks are elevated but unclear. Russia would likely challenge a seizure of its assets, seeking the principal plus interest, which could lead to a protracted legal battle. Russia could also sue depositories like Euroclear, which had a prewar obligation to pay out the interest on sovereign bonds. Alternatively, Russia—who decided not to litigate the G7 loan to Ukraine backed on the interest of their assets—could see greater benefit in using the assets in political negotiations, as part of a grand bargain that includes a peace agreement, with territorial adjustments and reparations, and a lifting of other sanctions.
