The moment feels almost surreal. Two years after Brussels immobilised more than €200 billion of the Russian central bank’s reserves, the money is still sitting in Euroclear’s vaults, yet it has begun to earn lavish returns. In 2024, “the windfall profits generated by such investment amounted to €4 billion, which was later earmarked to service the G7 loan to Ukraine” Politico reported in June 2025. What began as a defense strategy has transformed into an unexpected revenue stream.
The Flood of Unproductive Funds
Since eurozone interest rates are so high, Euroclear keeps the returns that a regular bank would normally credit back to its customers. Its own filings show €4.4 billion for 2023 and €6.9 billion for 2024, all labelled “extraordinary revenues”. Belgium promptly taxed those earnings and, after heated debate, wired the first €3 billion to a new EU support fund for Kyiv in March 2025. Meanwhile the G7 crafted a $50 billion “Extraordinary Revenue Acceleration” (ERA) loan: Ukraine gets cash up-front, and the future stream of Russian interest will cover the debt repayment. Taken together, the scheme could deliver €15 to 20 billion by 2027. However, still a fraction of the World Bank’s latest $524 billion reconstruction bill, but the only tranche that demonstrably comes from Russia’s own pocket.
Between Freeze and Forfeit
Strictly speaking, the EU has not confiscated anything. Article 215 TFEU lets the Council adopt “restrictive measures” such as asset freezes, and Regulation (EU) 269/2014 duly immobilising Russian reserves while promising legal safeguards. The freeze complies with customary international law, which protects central bank reserves from outright seizure, while still preventing Moscow from accessing or deploying the funds. The controversy sparks the moment Brussels tries to spend the money.
One possible justification lies in the doctrine of counter-measures: states injured by a grave breach may take acts that would otherwise be unlawful to induce compliance. A transatlantic memorandum led by Philip Zelikow and Paul Reichler argues that transferring the assets, or at least their proceeds, can be lawful because Russia refuses to pay reparations. Critics reply that counter-measures must aim to restore legality, not punish, and should remain reversible. Spending only the interest is plainly reversible; spending the principal is not.
Inside the Union, officials draw an analogy to the budgetary conditionality tool that withholds funds from member states violating the rule of law. Using profits while preserving capital, Anton Moiseienko argues on Verfassungsblog (4 Apr 2025), , mirrors that logic: pressure without outright expropriation. Still, Germany and Italy warn that full confiscation would look like “state robbery” and frighten other reserve holders. A Steptoe briefing even labels the €300 billion conundrum “the puzzle in Russia-Ukraine negotiations.”
Precedents: Imperfect, yet Instructive
History offers guidance if not even a template. After Saddam Hussein’s 1990 invasion of Kuwait, the UN Compensation Commission channeled Iraqi oil revenues for 31 years until
$52.4 billion in claims were paid. Likewise, Washington placed $3.5 billion of Afghan central bank reserves in a Swiss trust in 2022, earmarking the funds for humanitarian relief while formally preserving Afghan ownership. Both precedents ring-fenced state assets without a transfer of title: Iraq under an explicit UNSC Resolution 687 mandate, Afghanistan via a bilateral US-Swiss trust that required no UN vote. Neither faced the obstacle of a P-5 veto, which would block any similar Security-Council route against Russia today. The EU and G7 must therefore work without that multilateral shelter.
Why the Rule of Law Stakes are Huge
Property rights are not the only worry. Seizing reserves could make the euro look unsafe as a store of value, prompting diversification into rival currencies or gold. Balkan Insight records similar warnings from Gulf investors. Others note the risk of tit-for-tat: Russia could retaliate by grabbing European firms that still operate on its soil, assets worth roughly $90 billion, Bruegel calculates.
Above all, there is the Union’s self-image. Brussels reminds joining members that entry hinges on the rule of law, an independent judiciary and the effective protection of property rights among other guarantees, so it cannot afford to look reckless with someone else’s.
Should the freeze lapse even briefly, Russia would. Yet delay carries its own dangers. EU sanctions must be renewed every six months, and Hungary has repeatedly threatened a veto. Should the freeze lapse even briefly, Russia would return its cash, shredding Europe’s leverage. Moiseienko’s Verfassungsblog piece warns that the next six-monthly renewal of EU sanctions, due in July 2025, is a make-or-break moment; if the roll-over fails, the freeze could lapse and the assets slip back to Moscow.
Building a Lawful Bridge from Assets to Aid
So, what does a rule-of-law-proof solution look like? Officials talk about two tracks working in tandem.
Track One: the EU Ukraine Facility. Brussels has drafted a regulation that placed both the windfall profits and potentially the principal into a stand-alone EU trust. An independent board (EU, Ukrainian and neutral experts) would invest the capital conservatively and wire the earnings to Kyiv for reconstruction and defence. A five-year sunset clause and automatic CJEU oversight would underscore that the measure is extraordinary and reviewable. Crucially, a contingency reserve would sit inside the fund to cover any future court award in Russia’s favour, should a peace deal or tribunal so decide. Belgium’s tax-and-transfer practice has already proved the mechanics work, the Facility would simply scale and formalise them.
Track Two: the G7 ERA loan. Here, nothing leaves Euroclear. Instead, Western governments lend $50 billion now, and Euroclear’s future interest pays the coupons. If the sanctions end ahead of schedule, the lenders – not Ukraine – would take the financial hit, so they’re strongly motivated to keep the freeze in place. The programme was green-lit in late-2024, the EU confirmed its €16.2 billion share soon after. Since it mobilises cash without touching the principal, ERA is viewed inside the Commission as the “low-risk, high-speed” leg of the plan.
Legal scholars still debate whether either track fully resolves sovereign-immunity hurdles. But as Crisis Group points out, the mere existence of a credible channel may shift the negotiation equilibrium by showing Moscow that rebuilding Ukraine will be funded, one way or another, out of Russian money.
A Moment of Decision
Time is running out. Sanctions must be renewed in July, Trump’s talk of a big deal with Russia weakens US resolve, and every missile that damages Ukraine’s power grid makes its funding gap even larger.
If Europe hesitates, it risks letting Russia off the financial hook and reinforcing accusations from the Global South the West of double standards. Yet if Europe acts carefully, anchoring its measures in Article 215 TFEU, framing them as reversible countermeasures, subjecting them to CJEU scrutiny, and capping them with a sunset clause, it can prove a larger point. The rule of law is not an obstacle to justice but how justice is delivered. As Bruegel’s Nicolas Véron wrote back in 2023, “the EU can use interest income made on immobilised Russian reserve assets to support Ukraine, but confiscating the assets now would be a mistake.” Two years later, that middle path, skim the profits, escrow the capital, still looks like the smartest course.
The political paradox is delicious. Vladimir Putin once boasted that Western sanctions would crumble under their own contradictions. Instead, they have created a revenue stream that can rebuild the country he tried to destroy. If Brussels and its partners seize that opportunity without trampling legal principle, they will have achieved something rare in geopolitics: turning money into morality and doing so by the book.
This article is part of a joint online symposium with the Blog Jean Monnet Saar on the topic of “Protecting the Rule of Law in the European Union – Mechanisms and National Responsibility.” An overview of all contributions can be found here.
Suggested citation: Seabright, Xenia, Frozen Funds, Real Aid: EU’s Cash Rescue for Ukraine, JuWissBlog №. 71/2025, 07.08.2025, https:/www.juwiss.de/71-2025/
This post is published under CC BY-SA 4.0.
