Confiscation of Russian central bank funds

Euroclear Bank, the central securities depository based in Belgium, holds frozen Russian assets variously estimated at €125 billion ($137 billion), Euroclear generated €3 billion ($3.28 billion) in profits from these assets in the first nine months of 2023. Belgium anticipates 2023 tax revenues of €625 million ($684 million) on the income generated by frozen Russian assets and €1.7 billion ($1.86 billion) in 2024. According to Belgian prime minister Alexander De Croo, 100% of this tax revenue should go directly to Ukraine. which are said to involve distributing to Ukraine some portion of the profits generated by the frozen assets. Another European clearinghouse holding frozen Russian assets, Clearstream, is in Luxembourg. Both Belgium and Luxembourg have asked for assurance that they will not be required to bear all the risks that may attend European action against these assets. == Legality of confiscation of state assets ==

In September 2023, the Renew Democracy Initiative (RDI) released a report (lead author Laurence Tribe) which concluded that Russia's arguments against confiscating its frozen state assets and transferring them to Ukraine have no validity, either practically or under U.S. or international law. According to Tribe, "There is simply no basis for saying Russia can violate Ukraine's sovereignty while invoking its own sovereignty as an inviolable shield." The report argues that confiscation of Russian assets would be permissible under the international doctrine of "countermeasure", according to which an action (such as confiscation) that would ordinarily violate international law is permissible if it is undertaken with the aim of inducing another state to resume compliance with international law and is conducted in accordance with the requirements of the Articles on the Responsibility of States for Internationally Wrongful Acts (ARSIWA), which "are considered by courts and commentators to be in whole or in large part an accurate codification of the customary international law of state responsibility". According to the report, since a strong showing can be made that Russia has violated fundamental international laws, confiscation is an appropriate countermeasure to induce it to comply with its international obligations. Other organizations have proposed a number of methods that can be used to confiscate the frozen assets, based either on countermeasures or on the enforcement of international judgments against Russia. On 12 January 2024 Russia was said to be close to initiating legal proceedings to challenge in court the freezing of its frozen central bank assets. Russians believe that such litigation "could last for decades", and in the interim would block any transfer of the assets to Ukraine. Countermeasures must be temporary and reversible An article in Foreign Policy disagrees that confiscating Russian frozen assets and delivering them to Ukraine would constitute a valid countermeasure. It points out that the purpose of a legitimate countermeasure is to induce compliance with international law and not to act as punishment for violations. As such, it must be temporary and capable of being reversed if the violating country resumes its compliance with international law. This is the prevailing view and it has much support. Others assert that this errs in its assumption that the sole function of countermeasures is to induce compliance with international law, insisting that this is contradicted by Comment 1 to Article 22 of ARSIWA, which says, 'In certain circumstances, the commission by one State of an internationally wrongful act may justify another State injured by that act in taking non-forcible countermeasures in order to procure its cessation and to achieve reparation for the injury...' (emphasis added). Looked at in a different way, freezing the €300 billion until Russia has complied with its reparation obligation to Ukraine has the same impact on Russia as transferring the €300 billion directly to Ukraine. According to this line of thinking, if there is a right to hold onto the €300 billion until Russia agrees to give it to Ukraine then it is absurd to say that the doctrine of reversibility is violated if it is transferred directly to Ukraine but it is not violated if the countermeasure is "reversed" and the money is transferred to Russia but under conditions that offset it against an amount that Russia would be required to pay Ukraine, as in one European Commission proposal. Others add that while the ARSIWA may have some flexibility on reversibility, it has no flexibility on the requirement that countermeasures be temporary, and confiscation is not temporary. However, though this is disputed by some, it is widely believed that even if it is not expressly sanctioned in the ARSIWA, a rule has emerged under customary international law entitling third party states to apply countermeasures to enforce compliance with ("owed to the international community as a whole") obligations. Legality of countermeasures to enforce obligation to pay reparations The obligation to pay reparations is not, or may not be, an obligation, rendering dubious the legitimacy of countermeasures by third party states to enforce an obligation to pay reparations. In addition, the leading treatise on the question of third-party countermeasures concluded that, with one possible exception, "third-party countermeasures have simply not been adopted to obtain any form of reparation". == Legality of confiscation of income of frozen assets ==

The EU has concluded that it "can't legally confiscate outright frozen Russian assets", (US$3.4 billion) and a "windfall profits tax" on those profits is being investigated. European Commission President Ursula von der Leyen said on 22 June 2023 that before mid-July they would come up with a proposal on how to use these frozen assets to benefit Ukraine, but this was later postponed until September, and then until year-end. The G7 has also backed the idea of finding a way to access the frozen assets to benefit Ukraine. Those arguing that it is an illegitimate countermeasure to confiscate Russian assets and deliver them to Ukraine for purposes of reparations also argue that the same principle governs investing the frozen assets and turning over investment gains to Ukraine, The proposal announced 12 December 2023 by the European Commission to use the interest and profits to benefit Ukraine was said to take the position that these revenues "do not constitute sovereign assets and do not have to be made available to the Central Bank of Russia under applicable rules", and therefore delivering them to Ukraine would not violate the reversibility requirement. == Other concerns ==

Effects on currencies Christine Lagarde, president of the European Central Bank, which takes a view opposite that of the European Commission concerning the risks of using these profits for the benefit of Ukraine, warned the European Union that taking action against frozen Russian assets could endanger the eurozone's financial stability and weaken the standing of the euro as a reserve currency, arguing that the negative consequences to the EU could exceed the amount generated for Ukraine. Many international law experts believe that Ukraine's best chance against Russian assets lies in a favorable end to the war with Russia, after which its claim for reparations under international law would be clear. The RDI report argues that the claim that such an action could weaken a particular national currency has no force if all the major currencies take the same action. "The idea is to do this multilaterally. ...If others didn't, there might be a flight from the dollar. But if it is done by all the major currencies, where are people going to move their money?" The reality is that Russia's ability to access the frozen funds is forever gone, and it is unclear why delivering the funds to Ukraine would damage the international financial world in ways that haven't already materialized. Precedent The RDI report claims that "any concern that confiscating Russia's assets will set a dangerous precedent if similar circumstances arise in the future rests on an assumption that conduct analogous to Russia's has occurred with frequency in the modern era or will in fact recur. On the contrary, Russia's war in Ukraine may well be unprecedented since the Second World War." Others ask how, once Russia's assets have been seized, Western democracies will be able to convince China or India, sometime in the future, that they have no right to confiscate whatever assets they wish. He said that it would set a "healthy precedent" if countries committing aggression against their neighbors stand to lose state assets. Others have maintained that it must not be forgotten that Russia is guilty of using a war of aggression to destroy Ukraine, its people and its culture, and to erase it from the map, and that since 1945 there have been few, if any, breaches of international law as serious as this. To argue that under these circumstances seizing Russia's sovereign assets would undermine the international financial system is to argue that foreign reserves must be safe from seizure no matter what, and is like arguing that if real estate in London that represents the proceeds of crime is not free from the threat of seizure by the government, then all real estate in London has lost its security. On December 12, 2025, the Central Bank of Russia announced its decision to initiate legal proceedings against Euroclear in a Russian court. The central bank stated that Euroclear's actions had caused it damages by depriving the Russian regulator of the ability to manage its own cash and securities. The claimed damages amounted to 18.2 trillion rubles (equivalent to €195.54 billion or $229.05 billion at the Central Bank's exchange rate as of December 12) and consist of frozen central bank funds, the value of blocked securities, and lost profits. Competing claims against the frozen assets The strength of Ukraine's claim against the frozen assets would be diminished if Russia and Ukraine were to negotiate an end to hostilities that did not include reparations for Ukraine, or included an amount less than the value of the frozen Russian assets. In that case, Russia would have a claim for their return. Furthermore, there may be judgment creditors of Russia with claims that would have a higher priority than those of Ukraine, or who could at least delay reparations to Ukraine until the conclusion of litigation. Therefore, it has been suggested that the frozen funds should be transferred to an international entity that would be as insulated as possible from all claims except those of Ukraine. The RDI report suggests that the frozen assets be transferred to an international fund analogous to the United Nations Compensation Commission (UNCC) that was set up to handle the transfer of Iraqi state funds to Kuwait after Iraqi invasion of Kuwait in 1990. Use to which confiscated assets would be put The justification for confiscating Central Bank of Russia assets is found in Article 31 of the ARSIWA which says, "The responsible State is under an obligation to make full reparation for the injury caused by the internationally wrongful act." However, if confiscated Russian assets are used not to repair any injury suffered but instead to fund arms supplies to Ukraine, then Russia and its sympathizers could maintain that the confiscation did not constitute reparations but was instead a penalty, which does not qualify as a legitimate countermeasure under ARSIWA, entitling Russia to reparations under Article 31 for the amount unjustly confiscated. ==See also==