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The EU Freezes and “Appropriates” Russian Assets Indefinitely: Trigger a Global Trust Crisis

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On December 12, the Council of the European Union (EU) passed a highly controversial resolution by an “overwhelming majority”: announcing the indefinite freezing of approximately 300 billion euros in overseas assets of the Russian central bank, and for the first time proposing—through a so-called “international law workaround mechanism”—to transfer part of the assets to Ukraine for use. Russian President Putin said during the “annual review” event held in Moscow on the 19th that the attempt to confiscate Russia’s assets in Europe is “not even theft, but robbery.”

This move is seen by the outside world as a major escalation in the EU’s history of sanctions against Russia, and has been criticized as crossing the “red line” of international finance and international law. After the resolution was announced, Russia quickly launched strong countermeasures, suspending transit transportation of natural gas to the EU, and placing 12 EU countries on a “special unfriendly countries list.” The contest over massive sovereign assets is rapidly extending from the military battlefield of the Russia–Ukraine conflict into the global financial system, and its continuously expanding spillover effects are profoundly reshaping the international financial order, while prompting many countries to be highly vigilant about the issue of “asset security sovereignty.”

Sanctions Escalate Again: From “Freezing” to “Appropriation,” the EU Touches the Financial Bottom Line

The key breakthrough of this Council resolution lies in a fundamental change in the method of disposing of Russian central bank assets—upgrading from “freezing” to “targeted appropriation.” According to the disclosed text of the resolution, the EU plans to advance the relevant operations in two steps. In the first step, targeting roughly 200 billion euros in cash-type assets of the Russian central bank held within EU member states, the EU will, through a so-called “custody account restructuring” method, convert them into “reconstruction loans” provided to Ukraine, to be used for postwar infrastructure repairs and fiscal expenditures. In the second step, it will implement a “mandatory transfer” of the investment income from the remaining roughly 100 billion euros in assets, and clearly stipulate that these proceeds will be earmarked for Ukraine’s procurement of military equipment and battlefield medical support.

In order to avoid controversy at the level of international law as much as possible, the EU has carried out careful legal design. On the one hand, the EU cites Article 51 of the United Nations Charter regarding the “right of self-defense,” defining the appropriation of Russian assets as “supporting Ukraine’s exercise of the right of self-defense”; on the other hand, the EU has also joined with allies such as Canada and Japan to promote the establishment of a so-called “International Asset Assistance Alliance,” attempting to dilute the legitimacy controversies of unilateral sanctions and asset disposal under the cloak of “multilateral consensus.”

According to data, among the 300 billion euros in assets that have been frozen and are intended to be appropriated, Germany holds about 78 billion euros, France about 52 billion euros, and Italy about 43 billion euros, making them the main implementing countries of the plan and therefore facing higher political and economic risks. In the end, the EU bypassed veto power through a “special voting mechanism,” and the resolution was passed with the result of 25 countries in support, 3 countries against, and 1 country abstaining.

Cracks Within the EU Emerge: Orbán Warns of a Dual Backlash in Finance and Law

On December 13, Hungarian Prime Minister Orbán again publicly stated his position on this issue, bluntly saying that if the EU insists on using Russia’s frozen assets, it will trigger “extremely serious problems.” He pointed out that, on the one hand, this move will significantly reduce global trust in Europe’s financial custody system; on the other hand, the Russian central bank has filed a lawsuit on the relevant issue against Euroclear, the European clearinghouse that holds a large amount of Russia’s frozen assets, which means that Euroclear may face enormous repayment pressure in the future.

Orbán particularly emphasized that because the amount involved is huge, the economy of Belgium, where Euroclear is located, may even face the risk of “collapse.” As an important link in the eurozone financial system, once Euroclear suffers a systemic shock, its impact will quickly transmit to the entire eurozone financial market, thereby threatening the EU’s economic stability and monetary order.

Orbán’s remarks reflect the deep divisions within the EU over how to handle Russia’s frozen assets. Using the central bank assets of a sovereign state may not only trigger complex and prolonged legal disputes, but may also shake Europe’s international image as a safe place to store assets.

Russia’s Strong Countermeasures: Energy “Cutoff” Combined with Reciprocal Asset Freezing

In response to the EU’s “asset appropriation” plan, Russia swiftly launched multi-layered countermeasures. On December 13, Russian President Vladimir Putin signed a presidential decree announcing the immediate suspension of natural gas deliveries to the EU via the “Yamal–Europe” pipeline. This pipeline previously accounted for about 15% of the EU’s natural gas supply, and its shutdown is regarded as a critical blow directly targeting the EU’s energy security.

At the same time, Russia placed Germany, France, Italy, and 12 other countries that support asset appropriation on a “special unfriendly countries list,” imposing comprehensive trade embargoes on enterprises from those countries and prohibiting cooperation in key sectors such as energy, minerals, and the military-industrial complex.

Even more deterrent, Russia announced that it would reciprocally freeze EU assets in Russia. The Russian Ministry of Foreign Affairs disclosed that EU enterprises hold cumulative assets in Russia exceeding 450 billion euros, covering multiple sectors including energy projects, manufacturing plants, and financial institutions. Large corporations such as Germany’s Siemens, France’s Total, and Italy’s ENI Group all face the risk of having their assets in Russia frozen. Russian Minister of Economic Development Reshetnikov stated clearly: “For every 1 euro of Russian assets appropriated by the EU, Russia will freeze 1.5 euros of EU assets in Russia. This is an unshakable principle of reciprocity.”

In addition, Russia has accelerated the process of “de-dollarization.” The Russian central bank announced that it would reduce the proportion of euros in its foreign exchange reserves from 12% to zero, converting them entirely into renminbi, rubles, and gold. It will also expand local-currency settlement with countries such as China and India, requiring that the proportion of local-currency settlement in energy export trade be no less than 80%. Analysts point out that the dual countermeasures of energy supply cuts and asset freezing will inevitably exacerbate the EU’s energy crisis and inflationary pressures. At present, the EU’s natural gas reserves can only last until March 2026, and the cutoff of Russian gas may lead to industrial shutdowns in some European countries during winter.

European Clearing System Under Pressure, Global Financial Risk Spillovers Accelerate

Of the approximately 300 billion euros in Russian foreign exchange reserves frozen by the EU, about two-thirds are concentrated in European clearing institutions, mainly including Belgium’s Euroclear and Germany’s Clearstream. For a long time, these institutions have existed as international custodians with an image of being “neutral, secure, and non-politicized,” serving as critical infrastructure for global sovereign assets and cross-border capital flows. However, the EU’s push for the “targeted appropriation” of Russian central bank assets has effectively broken this long-established implicit consensus, sending a highly disruptive signal to global markets—that even sovereign central bank reserve assets may be illegally frozen and appropriated due to geopolitical maneuvering.

This signal is rapidly eroding the trust foundation of the global financial system and forcing emerging market countries to reassess the security of their foreign exchange reserves. Once the credibility of the European clearing system is substantially weakened, not only may Russia-related funds accelerate their withdrawal, but countries long subject to sanctions such as Iran and Venezuela, as well as ordinary multinational corporations and private investors, may also initiate larger-scale asset transfers out of risk aversion. The Credit Suisse crisis has already demonstrated that once the trust foundation of Europe’s financial system suffers a systemic shock, the cost of repair will be extremely high.

At a broader international level, the EU’s decision has been described by many in the financial community as “opening Pandora’s box.” IMF Managing Director Kristalina Georgieva publicly warned that the arbitrary appropriation of other countries’ central bank assets would undermine the core rules on which the global financial system operates.

At the same time, the EU hopes to provide Ukraine with a stable source of funding through asset appropriation, but the actual effect is not optimistic. Analysts note that due to complex legal procedures and cross-border coordination, the amount of funds that can actually be delivered may be less than 100 billion euros, and would need to be transferred in stages over three to five years, making it difficult to address Ukraine’s urgent needs in military equipment and fiscal support. By contrast, Russia’s countermeasures in energy and assets are, in turn, weakening the EU’s own capacity to support Ukraine. Persistently high energy prices have increased economic and livelihood pressures within the EU, and public support for continued assistance to Ukraine has fallen from 65% in 2023 to 41% in 2025. Governments in many countries are finding their policy space between “external assistance” and “domestic stability” increasingly constrained.

Legal risks are also steadily accumulating. The Russian central bank has already filed lawsuits against Euroclear in European courts based on the Vienna Convention on Diplomatic Relations and multiple bilateral investment treaties. Many international law experts point out that although the EU attempts to reduce its own liability through special legislation, if the disputes enter the WTO mechanism or the Permanent Court of Arbitration in The Hague, the EU’s chances of prevailing are not optimistic.

As the core hub of Europe’s financial infrastructure, Brussels is facing increasingly prominent systemic risk concerns. Euroclear processes approximately 5 trillion euros in cross-border payments daily. If a liquidity crisis were to emerge due to litigation or compensation pressure, the shock would rapidly spread to the eurozone’s bond, foreign exchange, and banking systems. The compensation claims proposed by Russia alone exceed 200 billion euros. About 8% of Belgium’s GDP directly depends on the normal operation of this institution, and the likelihood that the government will be forced to inject capital for rescue is significantly increasing. If a bailout is initiated, Belgium’s fiscal deficit ratio may breach the red line set by the EU’s Stability and Growth Pact, further intensifying domestic political and regional tensions.

From a longer-term perspective, if the neutrality and security of the European clearing system are fundamentally questioned, it may trigger severe volatility in the eurozone bond market in the short term, and in the long term may prompt large asset management institutions to reassess their European presence and shift part of their core operations to New York or Singapore. The result would not only be changes in capital flows, but also a potential decline in Europe’s position within the global financial system.

Li Zhengdong, Associate Research Fellow, Institute for Central and Eastern European Economic and Trade Cooperation, Ningbo University

Tao Jing, Assistant Research Fellow, Institute for Central and Eastern European Economic and Trade Cooperation, Ningbo University; Lecturer, School of Business

Ma Xiaolin, Specially Appointed Research Fellow, Institute for Central and Eastern European Economic and Trade Cooperation, Ningbo University; Bao Yugang Chair Professor; Professor at Zhejiang International Studies University; Director of the Institute for Mediterranean Studies

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Chaos and reckoning on the streets of France

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The streets of France have turned into a stage not merely for anger against the government, but for a deep-seated mistrust of the state’s approach to security. The blurring of the line between peaceful demonstrators and looters, lingering questions over police conduct, and the media’s refocusing on the immigration debate are bringing the country to the brink of a political reckoning far deeper than a routine public-order crisis.

In France, a government does not have to wait for an electoral defeat to lose its legitimacy. Sometimes, slogans chanted in a public square, tear gas fired down a boulevard, crowds penned in at the exit of a cordoned-off street, and testimonies of unhindered looting in shops only hundreds of metres away suffice to expose just how fragile the bond of trust between state and society has become.

Events in Paris on Saturday, 17 October point to precisely such a political fracture. Planned demonstrations with the participation of student unions, trade unions, and the Yellow Vests were marked throughout the day by police crackdowns, disputes over march routes, looting in the city centre, and widespread criticism of the government’s perceived inadequacy. The scene that emerged by evening suggested that France was grappling not merely with an issue of public order, but with a burgeoning crisis of confidence regarding the state’s impartiality and political motives.

Whom does the state permit to take to the streets, whom does it obstruct, and which forms of violence does it intervene against, and to what degree? The answer to this question may prove decisive in understanding France’s current political impasse.

The shadow of 17 October 1961

It is impossible to view the date of these demonstrations as a mere coincidence on the calendar. On 17 October 1961, a peaceful demonstration in Paris supporting Algerian independence was brutally crushed by the French police. Scores of people were killed, with some demonstrators drowned after being thrown into the River Seine. The event remains etched in memory as one of the darkest chapters in France’s colonial history and state-sponsored violence.

Sixty-five years later, as police interventions, youth rage, and the state’s stance on the right to protest are debated once again on the streets of Paris on 17 October, the resurgence of this historical memory was inevitable.

This memory may hold a distinct meaning, especially for French citizens of North African descent. Yet it would also be a mistake to reduce all the young people taking part in the demonstrations to a single identity, immigrant origin, or political motivation.

To what extent has the French Republic truly reckoned with the legacy of its colonial past and the relationship its security apparatus maintains with diverse segments of society?

Looters on the streets, where are the police?

Individuals dressed in black and associated in the public eye with the Black Bloc broke into shops at various locations, damaged businesses, and engaged in looting.

While peaceful demonstrators marched under a heavy police presence, fierce criticism arose that looting in certain areas had been allowed to unfold unchecked.

It is striking that while 14,000 police officers were deployed across the capital during the Pope’s visit to Paris, only 10,000 officers in total were assigned across the whole of France for the demonstrations of 17 October.

To which areas were police resources allocated? Had intelligence services assessed the risk of looting beforehand? While a robust security presence flanked the routes of peaceful marches, why was the same effectiveness not demonstrated in safeguarding commercial districts?

The deployment of elite units trained to quell urban unrest, such as CRS 8, does not resolve these questions. On the contrary, the failure to contain the incidents despite the presence of specialized units calls the quality of planning and coordination into question.

A political reckoning extending from Marseille to Limoges

The debate in Paris soon reverberated across the country’s other cities. In a televised address, the socialist mayor of Marseille stated that he had requested police reinforcements from the government, yet the units dispatched fell short given the scale and requirements of the city.

The mayor’s most striking allegation was that while looters stormed Marseille City Hall, the Hôtel de Ville, police officers stood roughly 200 metres away and failed to intervene. Stating that he possessed security camera footage, the mayor affirmed that he would await the scrutiny of a Parliamentary Commission of Inquiry and demand an explanation from the government.

The mayor of Limoges likewise issued what amounted to an ultimatum to the government, demanding the reconstruction of the torched town hall and the full reimbursement of costs. According to the mayor, the government had failed to protect a public building and neglected to provide the police with the necessary resources and backing.

These statements emerging from two distinct cities demonstrate that a new confrontation over security policy has arisen between local authorities and the central government. How security resources are allocated, which risks are prioritized, and whether the warnings of local administrations are heeded must all be brought to light.

The deepening scrutiny over the administration’s stance was compounded by President Emmanuel Macron’s refusal to accept the resignation tendered by Interior Minister Laurent Nuñez. The rejection of the resignation raises the question of whether the executive aims to preserve the chain of accountability, or fears that a political reshuffle would only exacerbate the crisis.

In either case, the government faces a crisis of trust.

An eight-minute speech and unanswered demands

Macron’s roughly eight-minute televised address failed to meet expectations regarding the political dimensions of the crisis. The president announced that he would meet with student unions and that the prime minister would engage with political parties, yet he presented neither tangible decisions nor a comprehensive political roadmap.

Education spending, police violence, the Palestinian cause, anti-fascism, and backlash against the Macron administration appear to have ceased being disparate issues in the eyes of the youth.

To be sure, the true strength of a state lies not in silencing its people and streets, but in addressing legitimate demands. It must not be forgotten that institutions unable to adapt and change are destined to break.

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What is scale in foreign policy? How is success measured in foreign policy?

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By its very nature, foreign policy feeds into and draws nourishment from numerous, disparate, and varied fields. It is a domain with manifold and diverse inputs. For foreign policy is examined alongside a broad array of subjects, ranging from geography to history, economics to intelligence, and military might to public diplomacy, commonly termed soft power elements.

The capacity of the state, that is, the scale of the state, or in other words the aggregate of its elements of power (namely political, economic, military, and soft power components), is decisive in foreign policy. Geography is decisive in foreign policy. Commercial relations are decisive in foreign policy. Energy dependence on another country or countries, if present, is decisive in foreign policy. Foreign policy cannot be conducted in spite of these four factors.

There is more. A country’s capacity, its scale, does not increase overnight, from one day to the next. It requires planning. It requires national consensus. It requires time. It requires preparation. Nor are these enough. The regional and global environment, the conjuncture, and the international plane must also allow for it. The stance of allies and adversaries is, of course, also important.

For the international environment is, by its nature, complex. It is an environment rife with contradiction, turmoil, conflict, and tension. To draw an analogy, the person in the driver’s seat of foreign policy is not a motorist speeding along the road as they please. There are things they must not forget, rules they must obey, red lights, vehicles speeding up from behind, a truck moving ahead, and a heavy vehicle hurtling toward them from the opposite direction.

Success in foreign policy does not arrive simply because a politician we like has become foreign minister. For a foreign minister is only as effective as the power, capacity, and weight of their country. One must accept this plain truth.

Moreover, there are simple, straightforward questions that reveal whether foreign policy, which some find deeply complex and inscrutable, is successful or not.

There are undoubtedly ways to measure the effectiveness, prestige, influence, and success of foreign policy.

For instance, the number of countries that respect a passport, how many countries can be visited visa-free, and how many countries impose visa requirements and grant those visas only with great difficulty are important indicators of a country’s standing.

Let us take ourselves as an example. Which countries require a visa for the Turkish passport? Which ones do not? Is it easy for our citizens to obtain visas for the countries they primarily wish to visit?

Let us give another example from the Turkic world.

On the Cyprus issue, which we regard as a national cause across government and opposition, right and left, Kemalist and Milli Görüş adherents alike, how many countries have we succeeded in having recognize the TRNC? Why do the Turkic states (Azerbaijan, Kazakhstan, Kyrgyzstan, Turkmenistan, Uzbekistan) not recognize the TRNC? Far from recognizing the TRNC, how do the Turkic states in Central Asia (Turkistan) explain to Ankara their developing relations with the Greek Cypriot Administration of Southern Cyprus, which Türkiye does not recognize, their appointment of ambassadors, and their recognition of Southern Cyprus as the island’s sole legitimate government?

We must also ask this question, of course: What is the state of Türkiye’s bilateral trade with the Turkic states?

Let us give an example of the relationship between foreign policy and big capital.

In which countries are big capital circles, among the greatest supporters of the ruling bloc, winning major tenders?

In our country, across both ruling and opposition ranks, there is a political party order that supports Türkiye’s EU membership. Yet how much progress has been made on EU membership?

Why is US President Trump not keeping the promises he made to Türkiye at the NATO summit held in Ankara a few months ago?

How many contracts has the new regime in Syria, the al-Sharaa administration, awarded to Turkish companies for the reconstruction of its country?

Has the government in Libya that Türkiye supports paid the money owed to Turkish construction firms, outstanding for years?

How does Qatar, with whom our relations are very good, explain its developing ties, energy agreements, and joint military drills with Greece and the Greek Cypriot Administration, disregarding our sensitivities?

Who is the addressee of the harsh statements used in recent weeks by Azerbaijan, which we view as “two states, one nation”? To what extent does Azerbaijan share Türkiye’s policy on Israel? What does Türkiye think about the scale, depth, and intimacy of Azerbaijan-Israel relations?

These questions can certainly be multiplied.

Yet without taking into account the scale of the state and observing the criteria for measuring foreign policy, no sound assessment can be made.

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The era of corridor alliances in the Middle East

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In the Middle East, war is no longer waged merely to seize territory. The true contest turns on who will control the energy pipelines, trade routes, ports, and railways of tomorrow. Missiles may strike cities today, but the maps of the future are being drawn through transport and energy corridors.

In this context, interpreting Türkiye’s presence in the Mecca Alliance solely as military support for Saudi Arabian security remains incomplete; it fails to explain why two states that viewed each other with mutual suspicion until recently would take steps toward a cooperation close enough to constitute a shared destiny.

Alongside Saudi Arabia’s existential motives, Ankara’s participation in this alliance is anchored in a profound geopolitical foundation: to position itself within, and if possible at the very centre of, the Middle East’s reconfigured energy and transport corridors.

Today, it cannot be said that Riyadh and Ankara see eye to eye on every regional issue. The threat perceptions and priorities of the two countries do not, quite naturally, entirely coincide. On the geopolitical chessboard, partnerships do not always arise from identical agendas. When reasons are sufficiently compelling, particularly existential ones, they can override political differences and enable common ground along the same strategic path.

A new war of corridors unfolds in the Middle East

On one side lies IMEC (India-Middle East-Europe Economic Corridor), planned to extend from India through the United Arab Emirates, Saudi Arabia, Jordan, and Israel to Europe. On the other stands the Development Road, which aims to link the Persian Gulf across Iraq to Türkiye, and onward to Europe.

These two undertakings are, of course, far more than mere transport projects. They represent two divergent geopolitical answers to where the future flow of trade and energy between Asia and Europe will traverse; for Türkiye, this issue is of vital importance.

If a corridor system taking shape to Türkiye’s south, beyond Ankara’s orbit, becomes permanent, Türkiye could forfeit not only an economic opportunity but also a substantial portion of its strategic centrality in the Middle East. It is through this prism that the Mecca Alliance must be evaluated.

Türkiye’s seat at the same table with Saudi Arabia signifies more than military solidarity. Riyadh and Ankara must sit together to avoid exclusion from the region’s emergent security and economic architecture, for the security of a corridor and the corridor itself are no longer separate matters.

The Strait of Hormuz, the Red Sea, the Bab al-Mandab, and the Suez Canal are links in the very same chain. A security crisis in one directly impacts the others. While the vulnerability of Hormuz makes alternative export routes for Gulf oil indispensable, instability across the Red Sea heightens the strategic cost of Suez.

Saudi Arabia’s alternative pipelines connecting its eastern oil fields to Red Sea terminals are therefore not merely energy infrastructure; they are strategic bypasses mitigating dependence on Hormuz.

For Türkiye, the Development Road fulfills the same function across a broader geography. Stretching from the Persian Gulf through Iraq to Türkiye, and from Türkiye into Europe, this artery possesses the potential to forge a new overland backbone connecting the Gulf to the Mediterranean and Europe. As security concerns in the Red Sea mount and the vulnerability of Suez deepens, the value of this route rises accordingly.

The Hejaz Railway: Revived once again

The return of the Hejaz Railway to the regional agenda signifies far more than mere nostalgia. Once linking Istanbul to Damascus, Amman, and the Hejaz, the railway served as one of the primary transport and logistical arteries of the Ottoman geography.

Reviving the idea of the Hejaz Railway could become the emblem of Türkiye’s drive to reimagine its historical transport connections between the Gulf, the Hejaz, and the Levant through modern rail, energy, and logistics networks.

The objective here is not to restore the past, but to transpose the strategic logic of that historical geographical linkage into the twenty-first century. For this reason, Türkiye’s role in the Mecca Alliance and the resurgence of the Hejaz Railway project must be viewed as components of the same overarching picture.

Corridors do not consist solely of energy pipelines. Railways, ports, highways, electrical interconnectors, logistical hubs, and security architectures are all facets of the same geopolitical grid, and safeguarding these networks requires political alliances.

Herein lies the strategic significance of Saudi Arabia and Türkiye sitting at the same table in Mecca, even at a juncture when their views on Syria diverge.

Ankara and Riyadh do not need to agree on every subject. Yet neither wishes to see the new map of the Middle East drawn to its detriment. Türkiye’s aim is not to build an anti-bloc against any specific country alongside Saudi Arabia; rather, the goal is to avoid exclusion from the future energy and trade systems of the Middle East, while securing a decisive voice in establishing their security architecture.

Hence, for Türkiye, the Mecca Alliance is far more than a simple defence pact. Securing the Development Road, shielding Gulf energy corridors, stabilising the Red Sea, rethinking connections across the Hejaz and the Levant, and bolstering trade corridors reaching Europe all intersect within this single strategic equation.

In this equation, Türkiye’s foremost advantage remains its geography. Ankara sits at the northern terminus of the overland routes linking the Gulf to Europe; within NATO; and at the crossroads connecting the Black Sea, the Caucasus, the Eastern Mediterranean, and the Middle East.

Will Türkiye become one of the powers shaping the Middle East’s energy and trade architecture over the coming decades, or will it be reduced to a mere transit state traversed by routes designed by others? That question defines the true strategic significance of the Mecca Alliance for Ankara.

In the Middle East of tomorrow, it will be impossible to separate the corridor carrying energy, the security framework protecting that corridor, and the alliance constructing that security framework.

Whoever controls the corridor shapes commerce. Whoever guarantees the routes through which trade flows holds sway over the regional balance of power. This is the true dimension of the contest currently underway in the Middle East.

A succession of distinct and largely mutually exclusive ambitions are competing for dominance in the current climate: India’s linkage to Europe, the Gulf’s new economic horizons, Saudi Arabia’s alternative energy routes, the security crisis in the Red Sea, the strategic weight of Hormuz, and Türkiye’s aspiration to open outward to Europe via the Development Road. Ironically, perhaps, the conflict that will decide which corridor underpins global stability has already begun, and it will likely continue spreading to new fronts. Regrettably, the fires in our region appear poised to intensify long before they abate.

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