As of this month, roughly €275 – 320 billion in Russian central bank reserves (CBR) are frozen worldwide. About €210 billion of that sits in the EU, of which about €185–190 billion is at the Euroclear securities depository in Belgium.
Most of those CBR holdings were bonds that have since matured and turned into cash. The EU is looking for ways to mobilize that capital to help finance the defense of the Ukraine, at a time when the US is insisting that the bloc and its member states take a more active role in the conflict. Any attempt to use those frozen sovereign funds must deal with practical problems and international law objections.
One proposal tries to reduce the legal objections by changing the form of the asset, while not touching the ownership. A new council act under the sanctions regime would require Euroclear to use the blocked CBR cash to subscribe to a long-dated, zero-coupon EU bond. Russia’s blocked account would then hold an EU claim of the same face value. The subscription proceeds would go to the commission, which would lend the money to the Ukraine. In practice, the only change at Euroclear is that the cash would be invested in triple-A commission paper, instead of being placed against triple-A European Central Bank (ECB) deposits.
The set-up being contemplated would require the borrower to repay the loan when it begins to receive reparations from the Russian Federation. The commission has said it will ask Eurostat to confirm that member state guarantees for this plan do not count toward national deficit and debt metrics. Belgium, which hosts Euroclear, has asked for written burden-sharing guarantees so that it does not bear the litigation or retaliation risk alone. The International Monetary Fund (IMF), for its part, estimates a €55–60 billion external financing gap for 2026–2027, which is why the size of the envelope and the timeline matter.
Firstly, Russia keeps ownership of the assets, the EU does not confiscate the principal, which, in theory, means that the step is temporary and reversible. It is designed to help finance Ukraine while pressuring Russian for a cessation of hostilities. Secondly, nothing permanent happens until there is an internationally recognized duty to pay reparations. If that duty exists and Russia does not pay, the EU can offset the obligations by withhold redemption payments on the EU bonds in Russia’s blocked account and apply the same amount to the Ukraine’s award. Thirdly, the plan runs under EU law. The sanction rules control how custodians handle the assets, and existing EU borrowing tools allow the commission to issue a long-dated zero-coupon bond and lend out the proceeds. There are open questions, especially about how far collective countermeasures can go and how to take security over a state-to-state claim, but those issues are well mapped in the main legal analyses on using collateral rather than confiscation.
The zero-coupon, long-maturity design serves clear purposes. It avoids regular interest payments while the reparations issue remains unsettled, which helps national treasuries and calms rating concerns. It also allows time for a lawful basis of repayment to appear. If a judgment or a settlement leads to reparations, Ukraine’s pledged claim can service the EU loan, and the EU can redeem the bond held in Russia’s blocked account.
If reparations do not arrive on schedule, the position can be extended, with member state guarantees covering the interim period. None of this requires a present-day transfer of Russian property.
The parties leading this push within the EU are hoping to hammer out the details of this €140 billion loan, as well as the risk-sharing arrangement insisted upon by countries like Belgium before the end of the year. The first installments of the loan should reach Ukraine by year’s end.
Moscow has warned openly that if Brussels moves ahead with using the frozen central-bank reserves, Russia will retaliate by nationalizing and selling Western-owned assets inside Russia. The Kremlin has called the EU plan “theft,” and says it has lists of foreign assets to target. President Putin has already signed decrees enabling the identification and seizure of Western property as “compensation,” and offcials have drafted fast-track procedures, as quick as 10 days, to put foreign assets under state control and auction them off, with Promsvyazbank assigned to run the auction processes.
Potentially affected parties should monitor the forthcoming council decision and regulation, commission guidance, Eurostat’s treatment of guarantees and any Russian countermeasures. Clients with interest tied to either Russia or Ukraine should map exposures, review setoff, assignment and put compliant contingency plans in place. Our International Trade & Foreign Investment team is available on short notice to brief boards and risk committees, update documentation and assist with implementation.
