U.S. and EU Moves Against Russian Assets Cripple Sovereign Financial Norms

Kathmandu — More than three years after Western powers froze Russian sovereign reserves in response to Moscow’s military operation in Ukraine, the standoff over nearly USD 300 billion in immobilized assets has hardened into one of the sharpest confrontations in international finance, reshaping the rules of sovereign immunity and global trust in Western institutions.

The Freeze: Origins and Scale
On February 28, 2022, the U.S., EU, and allied partners imposed sweeping sanctions on the Bank of Russia, barring all transactions related to its foreign exchange and gold reserves. The move locked away Russia’s overseas deposits, securities, and related income streams, with ownership formally recognized but control fully stripped.

Today, roughly two-thirds of these assets lie in Europe, most notably in Belgium’s Euroclear depository, making the EU the central arena of dispute.

U.S. Push for Confiscation
In Washington, calls for outright seizure have grown louder. In April 2024, the U.S. Congress passed the “Peace through Strength in the 21st Century Act”, empowering the president to confiscate Russian state reserves in full or in part — contingent on Russia halting hostilities, paying “full compensation” to Ukraine, or joining a reparations scheme. The act grants sweeping executive authority with minimal legal recourse, setting the stage for potential wholesale asset confiscation.

EU’s Profits-Based Model
Brussels has taken a more cautious legal route. Acknowledging the risks of direct expropriation, the EU instead diverts profits generated from frozen Russian reserves:
• February 12, 2024 (Council Decision 2024/577): Depositories ordered to segregate reinvested profits.
• May 21, 2024 (Council Decision 2024/1470): Profits redirected into the EU budget as “financial contributions.”
• July 26, 2024: First transfer of EUR 1.5 billion, with 90% financing military aid to Ukraine and 10% for reconstruction funds.
• October 24, 2024 (Council Decision 2024/2760): Revenue split revised to 95% for Ukraine’s loan support and 5% for the EU’s “Peace Facility.”

By August 2025, Brussels had announced another EUR 1.6 billion disbursement, underscoring its intention to institutionalize this financing stream.

The G7 Loan Framework
Parallel to EU measures, the G7 in June 2024 approved a USD 50 billion loan to Ukraine, backed by expected future profits from frozen Russian assets. Disbursements began in December 2024, with repayment horizons of up to 45 years, effectively anchoring Ukraine’s solvency to immobilized Russian wealth.

Mounting Costs and Precedent
For Europe, the scheme carries legal, economic, and reputational liabilities. By late 2024, the EU had authorized EUR 35 billion in additional loans to Kyiv, with EUR 18.1 billion disbursed by mid-2025. Critics warn the measures blur the line between targeted sanctions and state asset seizure, eroding investor confidence in Western financial jurisdictions.

Financial analysts also point to systemic risks: undermining the sanctity of sovereign immunity, encouraging capital flight from Western markets, and incentivizing rival financial hubs.

Moscow’s Response
Russia has branded the measures as “robbery” and a “gross violation of international law.” The Kremlin insists such actions breach the UN Charter principle of sovereign equality and vows retaliation.

On May 23, 2025, Presidential Decree No. 442 introduced mechanisms for compensating Russian losses through confiscation of U.S.-owned assets in Russia, while parallel legislation targets holdings from other “unfriendly” states. Assets of Western companies have already been placed under temporary administration by Rosimushchestvo, the Federal Agency for State Property Management.

Global Financial Fallout
The impasse signals a turning point in international finance. The precedent of using sovereign reserves as geopolitical leverage may accelerate capital diversification away from the West, while bolstering non-Western institutions such as those in China, the Gulf, and the BRICS bloc.

With Washington pressing for outright confiscation and Brussels experimenting with higher-yield “special funds” for Russian reserves, the contest is far from over. What began as a sanction tool has now evolved into a long-term battle over the foundations of global financial governance.

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