Seizing Russian assets: a thorny dilemma for Ukraine’s reconstruction

Expectations were high for a significant announcement on 7 July from U.S. President Donald Trump regarding Russia. Speculation ranged from providing long-range weapons to Ukraine and imposing secondary sanctions on Moscow to seizing $6 billion in frozen Russian sovereign assets held in the United States.

While this amount represents only a fraction of the estimated $300 billion in frozen Russian assets worldwide, such a decision could have signaled a broader push for allied nations to follow suit.

However, no such announcement materialised, leaving the issue of frozen Russian assets mired in a complex web of diplomatic hesitation, ongoing negotiations in Istanbul, and indecision in Brussels and Washington.

Since Russia’s 2022 invasion of Ukraine, the G7 and EU froze approximately $300 billion in Russian Central Bank assets, primarily held in Europe (e.g., €210 billion at Euroclear in Belgium), to punish Moscow and limit its war funding. Ukraine, facing reconstruction costs estimated at $411 billion to over $1 trillion, has pushed for these assets to be seized to finance its defense and recovery. The EU has allocated profits from these assets – around €3-5 billion annually – to support Ukraine, including a €35 billion loan in 2024 backed by these revenues. However, outright confiscation faces legal and financial hurdles, with France, Germany, and the European Central Bank citing risks to the euro’s stability and international law.

Istanbul talks: A stalemate in negotiations

Since May Ukraine and Russia have engaged in limited talks in Istanbul. While not full-fledged negotiations, these discussions have clarified both sides’ positions. Leaked memoranda, though unconfirmed by either party, reveal starkly different stances.

Russia demands a “renunciation of mutual claims related to damages caused during hostilities” and the unconditional lifting of sanctions, effectively seeking to nullify reparations and secure the return of its frozen assets.

In contrast, Ukraine proposes that frozen Russian assets be used to fund Ukraine’s reconstruction or remain frozen until Russia pays reparations. This approach underscores Russia’s reluctance to engage meaningfully on compensation while reinforcing the EU and G7’s stance that Russian assets will remain frozen until Ukraine is compensated for damages.

Ukraine’s diplomatic strategy aims to expose Russia’s intransigence, thereby pressuring allies to move toward asset confiscation. Yet, as the Ukraine Recovery Conference 2025 in Rome highlighted, a decisive breakthrough remains elusive.

Rome conference: reaffirming the status quo

At the Rome Conference on 10 July, German Chancellor Friedrich Merz reiterated the EU’s position: “The damage caused by Russia amounts to at least 500 billion euros. Russia must pay for it, and until it does, its frozen assets will remain inaccessible.”

With over $200 billion of Russian assets frozen under EU jurisdiction, confiscation is still viewed as a last resort due to legal and political complexities.

Ukraine, however, sees these assets as critical for reconstruction. Former Prime Minister Denys Shmyhal announced the creation of a $460 billion “Ukraine Fund,” to be financed through confiscated Russian assets and a proposed tax on Russian raw material exports, modeled on the reparations mechanism used for Iraq’s invasion of Kuwait in 1990–1991. Unlike Iraq, which accepted such obligations, Russia is unlikely to comply voluntarily, complicating the application of this model.

A new window of opportunity?

As the 50-day ultimatum issued by President Trump to Vladimir Putin nears its end, discussions about seizing Russian assets may gain momentum.

The European Parliament’s resolution on 9 July calling for confiscation, signals growing political support. Additionally, the U.S.’s shift toward funding Ukrainian aid through European budgets has made asset seizure more appealing. Polish Foreign Minister Radosław Sikorski framed the issue starkly: “Should the burden fall on our taxpayers or the Russians?”

Kyiv is also exploring creative solutions. During a meeting with U.S. Special Envoy Keith Kellogg, Ukraine’s Secretary of the National Security and Defense Council, Rustem Umerov, discussed using frozen assets to fund joint defense projects.

Deputy Head of the Presidential Office Iryna Mudra proposed a professionally managed fund to hold Russian Central Bank reserves, maximising returns for Ukraine’s benefit.

The path to confiscation requires balancing Ukraine’s urgent needs with the interests of its allies, who may prioritize their own economic benefits, such as defense contracts.

While full-scale confiscation remains a long-term goal, Ukraine is preparing for multiple scenarios. The unpredictability of global politics suggests that a window for action could open unexpectedly, and Kyiv must be ready to act.

In conclusion, the transfer of frozen Russian assets to Ukraine is stalled by diplomatic, legal, and political hurdles. While Ukraine pushes for innovative solutions and international support, the resolution of this issue hinges on the political will of allied leaders and the evolving geopolitical landscape.

Author: Ivan Horodyskyy, Director of the Dnistrianskyi Centre for law and politics for EUlive’s partner European Pravda

Caption: Secretary of the National Security and Defense Council of Ukraine, Rustem Umerov addresses media during a press conference following a new round of peace talks between Russia and Ukraine, Istanbul, Turkey, 23 July 2025. EPA/TOLGA BOZOGLU