Bloomberg: The EU cannot legally confiscate frozen Russian assets in full

Anhelina Sheremet

The European Union (EU) concluded that it could not legally fully confiscate the frozen Russian assets and instead focused on the temporary use of those assets.

This is reported by Bloomberg with reference to the relevant document.

The report says that the EU has focused on two options, how it could use more than €200 billion of frozen assets of the Russian Central Bank and send them to Ukraine.

The first is the temporary use of liquid assets of the Russian Central Bank, i.e. investment and transfer of the profit received from them to Ukraine.

The second option is a contingency fee. That is, companies with Russian assets that receive a large profit from investments can be obliged to transfer a significant amount to the EU. This could reduce the legal risk for the bloc because the EU would not be managing them.

An EU working group on the use of Russian reserves is discussing how to gather information and assess options under EU and international law. Its members do not see "a reliable legal remedy that allows the confiscation of frozen or immobilized assets only on the basis that these assets are subject to EU sanctions." Instead, they prefer to direct unexpected income from investments to Ukraine.

Several major global banks are concerned that the appropriation of Russian assets could lead to Russian retaliation against their remaining interests in the country, according to people familiar with the matter. Russia can make life difficult for foreign banks and target their local staff.

  • Since the beginning of the war in Ukraine, the EU has frozen the assets of the Russian Central Bank for more than €200 billion. A significant part of these funds is kept in the Euroclear depository and has already brought almost €750 million in profit in the first quarter of 2023. In addition, the EU has frozen €24.1 billion in assets belonging to Russians and Russian companies under sanctions.