EU leaders at a summit in Brussels failed to agree on a plan to confiscate illegally frozen Russian assets.
The idea of turning those frozen assets into a €140–€165 billion “reparations” loan for Kyiv has met resistance, and not only for political reasons. The row goes to the heart of what investors, states, and international law expect from Europe: predictability, legal clarity, and the protection of property rights. The summit’s decision to postpone a final judgement was therefore predictable and consequential.
Europe’s hesitation to confiscate Russia’s frozen sovereign assets was not a sign of prudence. Turning those funds into reparations for Ukraine might have satisfied political revenge, yet it would have ignited a legal and financial inferno—undermining the very principles that once defined the continent’s rule-based order. By stepping back, at least for now, the EU avoided setting a precedent that could have shaken its credibility, alienated the Global South, and triggered severe retaliation from Moscow.
Russian Reactions
If the frozen assets were confiscated, there was an immediate risk: retaliation and targeted countermeasures. Russia has repeatedly warned that any attempt to appropriate its immobilized central bank reserves would be treated as theft and would prompt countermeasures.
Western reporting and Russian statements alike have made clear that Moscow sees confiscation as a red line and would respond in ways that could harm particular EU national interests, from energy contracts to legal action and asset seizures of its own.
Those warnings are not abstract: European officials recognize that most of the relevant assets sit in private and public custody across a handful of jurisdictions (notably in Euroclear in Belgium), creating a focal point for political and legal risk.
Credibility and Legality at Stake
From an investor’s perspective, the central concern is credibility. Investors prize certainty, enforceable property rights, predictable dispute resolution, and adherence to international law.
A decision to transfer sovereign assets to a third party without an unmistakable legal mandate would complicate the calculus for global capital. Legal scholars and parliamentary briefings have underlined the absence of a clear precedent for confiscating a central bank’s reserves without Security Council authorization, which many argue would be required to square such action with established international legal norms. That legal uncertainty would do more than generate lawsuits: it would signal that states can re-engineer the rules of custody when geopolitics demands.
The question of legality is not merely technical. Several legal assessments, including recent European Parliamentary Research Service work and think-tank analyses, stress that unilateral seizure of sovereign assets risks breaching international legal protections for state property and central-bank immunity.
Without a United Nations Security Council mandate or an equivalently robust legal architecture, confiscation could invite reciprocal claims in international courts and undermine the Western legal architecture that underpins global finance. That is precisely the reputational hazard EU officials fear: an erosion of trust in Europe’s legal commitments.
The Global South watches on, uneasy
Political economy adds another layer. The Global South is watching. Reports published since 2024 show that some major Gulf actors signaled displeasure at the prospect of wide-scale asset seizures, warning privately that they could rebalance their portfolios away from Western holdings if property rights are perceived as politicized.
Media reporting and market intelligence suggested Saudi Arabia had in 2024 “veiled” threats to sell Western debt if large-scale seizures were attempted, a signal that the consequences would reverberate well beyond Russian capital flows.
For the EU, undermining the confidence of sovereign investors would be nothing short of self-sabotage: it would unsettle capital markets, accelerate fund withdrawals from Western banks, and strain diplomatic relations with powerful partners, such as the Gulf countries, whose vast reserves underpin Europe’s own financial stability.
The Belgian Factor: De Wever, the Pragmatic
Why Belgium mattered and why Bart De Wever became decisive? Much of the frozen stock is held through Euroclear, a Belgian-based securities depository; as a result, Belgium occupies an outsized position in any operational plan.
Prime Minister Bart De Wever’s insistence on guarantees that Belgium would not be left legally exposed effectively stalled an EU mandate to the Commission. De Wever’s intervention was less a parochial veto than a reflection of political realism: the state that physically administers the assets faces immediate risk of litigation and retaliatory countermeasures.
His demand that legal and financial risks be mutualized across member states explains the summit’s postponement.
The postponement: a Strategic Pause
What this postponement means in practice is twofold. First, it buys time for lawyers and technocrats to devise mechanisms that might isolate legal exposure (for example, by creating complex lending vehicles or seeking multilateral guarantees).
Second, it preserves the political option of using the interest on immobilized assets rather than seizing capital outright. But neither route removes the central dilemmas: the danger of Russian retaliation, the legal ambiguity over sovereign immunity, and the reputational cost with capital providers in the Global South.
The choice Europe makes will set a precedent. If the EU finds a legally sound instrument to redirect frozen sovereign assets to Ukraine, it will have created an extraordinary instrument of geopolitical finance manipulation.
If it proceeds without such consensus, the bloc risks signaling that state imperatives trump legal certainty, a shift that could make Europe a riskier harbor for international capital. Luxembourg is already uneasy.
Policymakers must therefore weigh short-term political gains against long-term loss of credibility. That is the uneasy bargain at the heart of the Brussels summit, and the reason the “rules-based order” that once seemed self-evident in Europe now looks fragile and contested.
Ricardo Martins—Doctor of Sociology, specialist in European and international politics as well as geopolitics
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