What are frozen assets and who freezes them?
Frozen assets are financial funds or assets whose owner cannot access or use them for any transactions or transfers due to restrictions imposed by a government – or a bloc such as the European Union.
In the case of Russia, both its sovereign assets – in the form of cash, bonds and securities held abroad – as well as personal assets such as yachts and real estate owned by sanctioned Russian billionaires, were frozen.
Assets are usually seized through sanctions.
“Implementation of the freeze depends on financial institutions,” Agathe Demarais, senior fellow at the European Council of Foreign Relations (ECFR), told DW, “such as commercial banks or central securities depositories (CSDs) who would have to block transactions and cut off access to frozen assets.”
Why were Russian assets seized?
Russian assets were frozen as a result of Western sanctions following the 2022 invasion of Ukraine. The move was intended to hamper Russia financially and ensure that it could not use that money to finance the war.
Some experts say the presence of the largest portion of frozen Russian assets in EU member states provides Ukraine with a major advantage in pursuing peace talks.
Where are the Russian assets?
Of the total frozen assets of approximately €300 billion, assets worth approximately €210 billion are under the jurisdiction of EU member states.
The rest are spread across the US, Japan, UK, Switzerland and Canada.
But the largest share – €180 billion – is held in Belgium at an institution called Euroclear.
What is Euroclear – and why is it against the EU using Russia’s assets?
Euroclear is a leading financial-markets infrastructure firm—so called a securities depository.
Euroclear is worried that freezing Russian funds would damage its reputation among international investors and could even trigger litigation by Moscow. The Central Bank of Russia has already decided to sue Euroclear for €200 – to recover both the frozen funds and the lost interest.
Which countries want to use Russia’s assets – and for what?
Most European countries, including Germany and France, want Russia to compensate for the damage caused by waging a war of aggression in Ukraine.
The frozen assets can therefore be used both to strengthen Ukraine’s security and to reconstruct the country.
which countries do No Want to use Russia’s assets – and why not?
From a legal perspective, accessing Russian frozen assets is a difficult area and there has been widespread debate about whether these assets, especially the principal amount, can legally be used to help Ukraine.
Belgium has vetoed the use of frozen assets due to fears of getting into legal trouble with Moscow. He is also worried that if Moscow asks, he will have to repay the money at a later date.
Furthermore, European giants Italy, as well as Malta and Bulgaria have called on the EU to look for alternative ways to meet Ukraine’s needs.
What is happening to the frozen assets in the interim?
They remain frozen or, as the EU says, frozen. This means that any transactions, or transfers back to Russia are blocked.
Last year, the EU decided to use the windfall profit earned on the assets in Euroclear and pay a first tranche of €1.5 billion to Ukraine in mid-2024.
Where does the US stand on use of Russian assets?
The US under President Joe Biden – which owns less than €5 billion of Russian assets – agreed to use the windfall to aid Ukraine. The current Trump administration wants to use a portion of the frozen Russian assets for joint projects with Moscow.
However, experts say the US can only decide what to do with assets lying under its jurisdiction and not those in EU countries.
What does Trump’s peace plan say about frozen assets?
According to a leaked version of Trump’s initial 28-point peace proposal, €86 billion ($100 billion) in frozen Russian assets would be invested in “US-led efforts to reconstruct and invest in Ukraine” and the US would receive 50% of the profits. According to ECFR’s Demarais, Trump intends to extract that money from Russian assets frozen in Europe, and use it to benefit both the US government and US companies.
According to the proposal, the remaining frozen funds, still in excess of €200 billion, would be invested in a joint US-Russian investment vehicle, “to create a strong incentive not to return to conflict”. However, for Demaris, this would only benefit Washington and Moscow, but not Ukraine.
Why has the EU “indefinitely frozen” Russian assets?
Originally, the freeze on Russian assets was renewed every six months. And every time it came up for renewal, there was a fear that Hungary’s Russia-friendly Prime Minister Viktor Orban might veto the renewal.
The EU’s decision to “indefinitely freeze” Russian assets achieves two goals: it prevents the need for renewal and hence a potential veto by Hungary, but also protects funds from the US.
“In essence this puts the assets out of the reach of the US, complicating Trump’s plan to transfer the assets to US companies or US-Russian investment funds,” Demaris said. “The move also paves the way for the EU to issue loans to Ukraine.”
Edited by: Andreas Illmer