Russia has warned the European Union that it will retaliate with countermeasures if the EU decides to use frozen Russian assets to help Ukraine. The threat comes as EU leaders ponder how to make use of the assets, with a myriad of legal and political risks surrounding the debate.
Following Russia’s invasion of Ukraine in 2022, Western countries froze Russian bank accounts, real estate properties, stocks, bonds, luxury assets, and various investments held by Russian entities and oligarchs. The funds also involve around €275 billion in central bank assets across the EU, the United States, Japan and Canada. The biggest share of these assets, €210 billion, is held within the EU.
The 27-member bloc has been deliberating how to make use of these funds, but critics say all proposed options risk violating international law and damaging the financial credibility of the EU. After the U.S. House of Representatives on Saturday adopted a bill that would allow the confiscation of Russian sovereign assets, the issue has come to the forefront in Europe.
Speaker of the Russian upper house Valentina Matviyenko warned Europe on Tuesday that Russia would retaliate with its own law if the EU were to confiscate Russian state assets. “We have a draft law, which we are ready to consider immediately, on retaliatory measures,” she said. “And the Europeans will lose more than we do.”
The Kremlin has repeatedly said that any seizure of its assets would undermine confidence in Western currency and Western central banks. As we previously reported, the seizure of assets is not a viable option for the EU because, under international law, foreign reserves are protected by state immunity.
EU leaders instead agreed in March on using the profits that Russian assets generate. While EU lawyers say it would go against international norms to confiscate the assets in their entirety, taking only the profits could be legally defended in court if Russia tried to sue.
The European Commission estimates the profits could be between €2.5 billion and €3 billion per year. The Commission has proposed transferring 90% of the profits to finance arms for Kyiv, the other 10% would go to budget aid for the war-torn country. Hungary and Slovakia, two EU member states that oppose sending military aid to Ukraine, have reportedly voiced their concerns about the money being used to send more weapons to Ukraine. The same goes for neutral militarily non-aligned countries such as Malta, Austria and Ireland.
