The $300 billion question: What to do with Russia's frozen central bank money?

Activists unfurl a large banner in support of Ukraine outside the European Council building ahead of an EU summit in Brussels, Belgium, Wednesday, March 5, 2025. (AP Photo/Omar Havana)

FRANKFURT, Germany — With U.S. support for Ukraine in doubt, Kyiv’s European allies are weighing whether to seize US$300 billion in frozen Russian assets and use the money to compensate Ukraine, support its military and help rebuild shattered homes and towns.

For now, the assets are still on ice, with opponents of seizure warning that the move could violate international law and destabilize financial markets.

Here are key things to know about the debate surrounding the Kremlin assets that were frozen shortly after Russia’s full-scale invasion in early 2022:

What are the assets and where are they?

Originally, the money was in short-term government bonds held as reserves for the Russian central bank. By now, most of the bonds have have matured and turned into cash piling up in custodian banks. Some 210 billion euros are in European Union member states, with the biggest chunk, some 183 billion euros, at Euroclear, a Belgian clearinghouse for financial transactions. Other amounts are at financial institutions in Great Britain, Japan, France, Canada, Switzerland, Australia and Singapore.

So far, the Group of Seven democracies have used the interest on the frozen cash to fund $50 billion in upfront assistance to Ukraine by borrowing against future interest income. That solution avoids legal and financial complications associated with outright confiscating the money and giving it it to Ukraine.

Who is calling for seizing the assets and why?

Some of Ukraine’s friends — Poland, the United Kingdom and the Baltic states Lithuania, Latvia and Estonia — want to do more by taking the principal as well, given the enormous damage Russia has done. The World Bank estimates that reconstructing Ukraine will cost $524 billion over 10 years, already more than the total of the Russian assets. If one or more Western governments resists seizing the assets, the others that want to could still go ahead.

Meanwhile, Ukraine’s allies in Europe are contemplating stepping up their financial aid in the wake of statements by U.S. President Donald Trump that Europe must take care of its own security. Several of those allies — France and Belgium, for instance — are already saddled with troublesome debt levels above 100% of gross domestic product.

Why do France, Germany and Belgium oppose seizing the assets?

European leaders say seizing the assets now would mean they couldn’t be used as a bargaining chip in any peace deal or to help enforce a ceasefire.

French Finance Minister Eric Lombard said Tuesday that it was against international law to seize assets in central banks. If Russian assets were seized without legal grounds, “it could pose a risk to European financial stability,” he said.

“I advocate great caution when it comes to those frozen assets,” Belgian Prime Minister Bart De Wever said at a March 6 EU summit. “At the moment, that is actually a chicken that also lays golden eggs. Those windfall profits are going to Ukraine.”

Opponents of seizure also fear that countries and investors would hesitate to use European financial institutions if they are afraid assets could be seized, undermining the euro’s role as an international currency for state reserves.

More specifically, governments worry that countries such as Saudi Arabia and China may sell European government bonds in response, said Elina Ribakova, an economist with the Bruegel think tank in Brussels. That would raise borrowing costs for governments already deep in debt.

She favors seizure, however, arguing that the European Central Bank has tools to thwart any unjustified bond selloff by purchasing government bonds.

Also looming over the issue are memories of the 2010-2012 European government debt crisis, in which borrowing costs spiked and raised concerns the euro currency could break up.

There is a “good deal of PTSD in the EU around messing with the EU sovereign bond market” because of that, said Tom Keatinge, director of the Centre for Finance and Security at the Royal United Services Institute in London.

Would confiscating the assets be legal under international law?

Some experts argue that seizure would be an appropriate “countermeasure.” That’s a specific legal term referring to an action that would normally be illegal but which is justified as a means to push Russia to stop its own violations of international law.

“There is no dilemma between using an aggressor’s assets to protect its victim and maintaining a commitment to the rules-based order,” wrote Nigel Gould-Davies, senior fellow at the International Institute for Strategic Studies and Britain’s former ambassador to Belarus, in a legal analysis.

Other scholars say confiscation would not be a legitimate countermeasure.

One reason: justifying a countermeasure as compensation for damages — instead of merely as pressure to behave — would be “a very significant expansion of the way we have used countermeasures in the past,” said Ingrid Brunk, professor of international law at Vanderbilt University Law School. ”I would term it as a violation of international law on countermeasures.”

Additionally, Brunk said international law grants strong protection to central bank reserves against seizure — a principle that has been “absolutely sacrosanct for a century.”

“At a time when countries agree on almost nothing, this is a widely, universally accepted rule,” Brunk said, cautioning against ”destabilizing one of the few ironclad bases for the international financial system.”

Keatinge said the legal question is a “50-50 call.” It boils down to a question of “political will.”

Have other countries' frozen assets been confiscated in the past?

Frozen state assets were used to compensate victims of Iraq’s 1990 invasion of Kuwait and Iran’s 1979 seizure of the U.S. Embassy in Tehran. Those actions were legally justified because they were part of post-conflict peace deals: a U.N. resolution in the case of Iraq, and by diplomatic accords in the case of Iran, noted Brunk.

What has Russia said or done about the frozen assets?

The Kremlin has repeatedly warned that the seizure of Russian assets would be illegitimate and erode investors’ confidence. “We view those intentions as unlawful, and any attempt to fulfill them would entail very serious legal consequences,” Kremlin spokesman Dmitry Peskov told reporters earlier this month.

Russia could, in theory, seize the assets of the estimated 1,800 Western companies that continue to do business in Russia. Recent legislation would enable state seizure of companies based in countries designated as “unfriendly,” Russian news media report.

However, there’s less to seize on Russia’s end. Foreign companies have suffered more than $170 billion in losses since 2022, often as they decided to leave Russia or scale back there, according to the Kyiv School of Economics.

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Burrows reported from London. Cook reported from Brussels. Associated Press writer Sylvie Corbet in Paris contributed to this report.

David Mchugh, Lorne Cook And Emma Burrows, The Associated Press