Go all in: how the ECB disposed of Russian assets

The European Central Bank (ECB) has decided not to go beyond its mandate and refused to support the initiative to provide Ukraine with 140 billion euros secured by frozen Russian assets. The ECB stressed that such a step carries both legal and financial risks, and therefore cannot be implemented in its current form. At the same time, the final fate of the possible use of these funds remains uncertain. About the arguments given by the ECB, how this decision affects the future plans of the EU and whether it is possible to make forecasts now, see the Izvestia article.

Loan to Ukraine: ECB decision

The European Central Bank refused to support the initiative to provide Ukraine with 140 billion euros secured by Russian assets blocked in the Belgian depository Euroclear. This was reported by the Financial Times on Tuesday, December 2, citing sources. According to the publication, the ECB concluded that the European Commission's proposal goes beyond its mandate and actually implies direct financing of government obligations of EU countries.

According to the FT's interlocutors, the European Commission has asked the ECB to act as a lender for Euroclear Bank in order to prevent a possible liquidity crisis. However, the regulator refused: three sources reported that the ECB regarded this as an attempt to circumvent the ban on so—called "monetary financing" - direct financing of the state budget deficit by the central bank.

Such a maneuver is prohibited by EU treaties, as it creates risks to price stability and undermines confidence in central banks. The ECB stressed that such a proposal is "not being considered", as it may violate the norms of European treaty law.

International disagreements about the future of Russian assets

The discussion of the European plan for the use of frozen Russian assets is accompanied by serious legal and financial disputes. Elena Sidorova, Head of the International Monetary and Financial Relations Sector of the IMEMO RAS, in an interview with Izvestia, drew attention to the fact that the proposal is directly based on Article 31, paragraph 2 of the Treaty on the European Union, according to which decisions on issues of the Union's strategic interests can be made by a qualified majority.

"Since this so—called reparation loan is directly related to this article, it should be easier in the future," the expert believes.

The US position

According to Politico, the US administration supports the return of its frozen assets to Russia after reaching an agreement on ending the conflict in Ukraine. According to two European diplomats, this is exactly the position Washington's representatives expressed during the summer visit of the EU Special Envoy for sanctions, David O'Sullivan, to the United States.

During the negotiations, the sources say, American officials made it clear that any frozen assets should be returned to Russia immediately after the signing of the peace agreement. This approach reflects the United States' desire to minimize legal risks and avoid setting a dangerous precedent for the global financial system.

France's position and Emmanuel Macron's statements

France, unlike Washington, insists on finding a legally sound mechanism that would allow the frozen Russian funds to be used in favor of Ukraine without violating international law. French President Emmanuel Macron said on December 1 that the European Union would find a technically and legally correct solution to the issue that would satisfy all parties and withstand possible legal disputes.

Macron stressed that the EU must complete this work before the next meeting of the European Council, scheduled for December 18-19. According to him, the key task is to ensure that assets are protected from any changes and create a mechanism that would allow funds to be safely disposed of without the risk of violating legal norms or deteriorating relations with partners.

Belgium's position

Belgium, where the Euroclear depository is located, occupies one of the toughest positions. Prime Minister Bart de Wever expresses concern that if sanctions are lifted, Russia will be able to demand an immediate refund, and Euroclear will not be able to fulfill its obligations if the money is used in the interests of Ukraine. He insists on providing the EU with legally binding and unconditional guarantees worth €185 billion.

As an alternative, de Wever proposed using the unspent funds of the EU's general budget, of which, according to the European Commission, 45 billion euros can be allocated, an amount sufficient for Ukraine's needs in 2026. According to the Belgian Prime Minister, an overly hasty promotion of the reparation loan could complicate the prospects for a future peace agreement.

Russia's reaction and possible retaliatory measures

During his visit to Kyrgyzstan on November 27, President Vladimir Putin reiterated Russia's position on frozen assets at a press conference. He stressed that any attempts to confiscate Russian funds would be regarded as theft and would entail a serious response from Moscow. As the Chinese newspaper 360kuai notes, these statements have increased tensions in Europe.

Chinese journalists note that Putin actually warned that if the West is ready to violate the established rules, Russia will also not comply with them. According to the publication, many Western governments still underestimate the scale of Moscow's possible retaliatory measures.

Decree No. 302, signed by the President of the Russian Federation in 2023, aroused additional interest. The document allows the Russian government to temporarily manage the assets of unfriendly states located in Russia. Earlier, the assets of Germany's Uniper and Finland's Fortum had already been seized under this mechanism, a step that Chinese observers consider as precautionary. Now, in their opinion, Moscow can apply this scheme on a much broader scale if faced with the confiscation of its assets abroad.

At the same time, Putin separately stressed at the same press conference that, on his instructions, the Russian Government was developing a package of retaliatory measures in case of theft by the European Union of frozen assets of the Russian Federation.

Legal framework

The European Union and the European Central Bank operate in the field of frozen Russian assets within the framework of strict legal restrictions stipulated in the Treaty on the European Union, the Treaty on the Functioning of the EU, as well as in the Charter of the European System of Central Banks.

Any decisions affecting the use of assets of a third State must comply with the norms of European and international law. An important role here is played by Article 31, paragraph 2 of the EU Treaty, which allows the Council of the EU to make decisions by a qualified majority on issues related to the strategic interests of the Union. It is this norm that proponents of initiatives aimed at using income or Russian assets themselves in favor of Ukraine refer to. However, even with this voting procedure, the measures taken cannot violate the fundamental international obligations of the European Union.

According to experts, there is a strict ban on monetary financing, enshrined in article 123 of the Treaty on the Functioning of the EU. This provision prohibits the European Central Bank and national central banks from providing direct financing to States or acquiring their debt obligations directly. As a result, the ECB has no right to support schemes that are essentially financing individual EU countries or Ukraine at the expense of Russian assets. Any operation in which the ECB actually assumes financial risks or secures credit obligations is outside the scope of its mandate.

An additional limitation is international legal norms, including the European Convention for the Protection of Human Rights and the generally recognized principle of sovereign State immunity. Russian assets located in EU countries are largely protected by these regulations.

Direct confiscation of such funds risks violating both international and bilateral investment agreements, setting a dangerous precedent. Brussels is aware that such a move would damage the reputation of European financial jurisdictions and could prompt other states to withdraw reserves from the EU.