EU’s $200 Billion Dilemma: Seize Russian Assets or Hold for Leverage?

Amid growing concerns that the United States may scale back its support for Kyiv, some European governments are considering seizing Russian assets that were immobilized after Moscow’s full-scale invasion of Ukraine, which started Feb. 24 2022.

The EU holds the bulk of Russian frozen assets, with approximately €200 billion sitting in Brussels-based financial institution Euroclear, generating interest. By contrast, the US controls only around $5 billion.

The move is seen as a way for Europe to assert itself, particularly after being excluded from recent US-Russia negotiations in Saudi Arabia on ending the war, as per Politico reporting.

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While estimates of the total frozen Russian funds in Europe vary, the widely accepted figure is closer to €200 billion than €300 billion.

“Seizure of those assets is a drastic option that would almost certainly guarantee Europe a bigger seat at the table, after it was frozen out by the US and the Kremlin in their recent talks in Riyadh,” Politico reported.

However, European governments remain split on whether using these funds would demonstrate Brussels’ strength or backfire.

Several EU nations, particularly those geographically closer to Russia, are urging immediate action. The governments of Estonia, Lithuania, Latvia, Poland, Czechia, are joined by the EU’s top diplomat, former Estonian Prime Minister Kaja Kallas, in voicing support for transferring the funds to Ukraine.

“[With the Russian frozen assets] we can replace US support if the US is still going to decide not to support Ukraine anymore,” said Estonian Foreign Minister Margus Tsahkna.

Lithuanian Foreign Minister Kęstutis Budrys dismissed legal concerns, saying: “I don’t take the argument that it’s legally problematic … we need [the] political will to do it.”

Tsahkna echoed this sentiment, stating: “We have €300 billion worth of Russian frozen assets in Europe, and we need to use it.”

Despite the push from Eastern European and Baltic states, major EU powers – including France, Germany, Italy, and Spain, joined by European Commission President Ursula von der Leyen – are reluctant to seize the assets outright. They argue that doing so could undermine investor confidence and eliminate the EU’s strongest bargaining chip in future negotiations with Moscow.

Kallas acknowledged that reaching a consensus remains difficult.

“We need to have everyone’s support for this. So far we don’t,” she said.

For now, the EU has set in law that the frozen assets will remain untouched until Russia agrees to pay post-war reparations to Ukraine. However, the funds remain an attractive option for financing Ukraine’s reconstruction, which the World Bank estimates will cost $486 billion.

As US Secretary of State Marco Rubio recently said after meeting Russian Foreign Minister Sergey Lavrov: “The EU will need to be involved in peace talks at some point” due to its significant role in sanctioning Moscow.

According to a Reuters report, British Foreign Minister David Lammy, on Tuesday, called on Europe to take the next step in dealing with frozen Russian assets by seizing them.

“It’s not an issue on which any government can act alone. We must act with European allies,” Lammy told parliament, adding that the matter had been discussed among G7 and other international allies.

“Of course, Europe has to act quickly, and I believe we should move from freezing assets to seizing assets,” he said.

Since Russia invaded Ukraine in 2022, Western nations have frozen between $300 billion and $350 billion in Russian sovereign assets – primarily government bonds held in Europe, the US, and the UK.

Now, Russia may be open to using some of these frozen assets for Ukraine’s reconstruction, but with a major condition – a portion must be spent in Russian-occupied territories, Reuters reports.

While discussions remain in the early stages, one idea floated in Moscow is allocating a significant share of frozen reserves toward rebuilding Ukraine as part of a potential peace agreement.

A source familiar with the talks told Reuters that Russia could agree to up to two-thirds of these assets being used for Ukraine’s recovery – but only under strict oversight mechanisms. The rest, however, would be directed to the Russian-controlled regions of eastern Ukraine, which Moscow now claims as its own.

In 2023, the G7 declared that Russian frozen assets would remain inaccessible until Moscow compensates Ukraine for wartime destruction. By October 2024, the G7 nations agreed to provide Ukraine $50 billion in loans, using proceeds from Russian assets held abroad as collateral.

Russia, meanwhile, has repeatedly condemned the freezing of its sovereign reserves, arguing that it violates free market principles and threatens global financial stability. In retaliation, Moscow has drafted legislation to seize assets from companies based in “unfriendly” countries – nations that imposed sanctions on Russia for its invasion of Ukraine. However, this bill has yet to be passed in Russia’s parliament, which acts at the bidding of Russian autocrat Vladimir Putin.