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

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