Russia has escalated its warnings to Europe, with President Vladimir Putin signing a decree that could pave the way for the swift seizure and sale of Western assets within Russia. This move comes as European leaders are set to meet on Wednesday to discuss a controversial proposal: a plan to extend a $165 billion loan to Ukraine, collateralized by Russian state assets currently frozen across Europe.
Moscow views this European initiative as a hostile act and has indicated that it will retaliate. Analysts suggest that Russia could target assets belonging to foreign companies and individuals from countries that support the loan, a tactic already seen during the ongoing conflict, where several Western firms have had their operations seized.
Russian Finance Minister Anton Siluanov has asserted that Russia possesses an equivalent amount of frozen Western assets to those held by the West, signaling a readiness for a symmetrical response. Since the war began, Russia has been redirecting profits from Western assets in the country into state-controlled bank accounts, effectively freezing them.
The idea of leveraging frozen Russian funds has gained significant momentum among European officials, particularly as American aid to Ukraine appears to waver under President Trump’s administration. The European Union’s executive branch is pushing forward a proposal for an interest-free “reparations loan” of 140 billion euros ($165 billion) to Ukraine. This financial mechanism is designed to utilize the Russian assets as collateral without outright confiscation, with repayment contingent on Russia compensating Ukraine for war damages. Britain is also reportedly considering a similar plan.
“We urgently need a more enduring strategy for military support,” stated Ursula von der Leyen, President of the European Commission, on Tuesday. “My proposal for a reparations loan, leveraging immobilized Russian assets, aims to provide just that.” She clarified that the loan would be distributed in tranches and would not entail a direct seizure of the assets. A previous loan to Ukraine, backed by interest generated from Russian assets, has already been provided by the Group of 7 nations.
This evolving strategy to utilize Russian assets for Ukraine has gained traction following initial proposals from Ms. von der Leyen and a recent similar one from German Chancellor Friedrich Merz. Merz is facing growing pressure from a far-right opposition at home, which criticizes him for allocating German taxpayer money to Ukraine. However, the prime minister of Belgium, where the majority of Russian assets are held, has expressed opposition to the plan, citing significant risks for his smaller European nation.
Maria Shagina, a research fellow at the International Institute for Strategic Studies, called this a “very interesting geopolitical turn.” She emphasized that given President Trump’s increasingly isolationist foreign policy stance, “Europe must adapt and pursue a new strategy.”
What has Russia said?
This shift in European policy is viewed with deep disapproval in Russia, where President Vladimir Putin has long prioritized the nation’s financial stability.
The approximately $300 billion worth of Russian sovereign assets frozen by Western nations, primarily in the European Union and Britain, represent nearly half of the Russian Central Bank’s gold and foreign exchange reserves, as reported by Russia’s Finance Ministry in 2022. These assets were frozen shortly after Russia launched its full-scale invasion of Ukraine.
Maria Zakharova, spokeswoman for Russia’s Foreign Ministry, clearly stated in September that Moscow would retaliate if Europe proceeded to use these funds. “We have repeatedly affirmed that we will respond forcefully to any hostile actions aimed at depriving Russia of ownership over its sovereign assets,” Ms. Zakharova declared on September 12. “We reiterate this stance.”
Russia might consider the proposed European financial engineering, designed to avoid outright asset seizure, as a distinction without a difference.
In a decree issued on Tuesday, President Putin outlined an expedited process for valuing state-held assets in Russia within 10 days and facilitating their sale to new owners through PSB, a state-controlled bank involved in financing Russia’s military-industrial complex. This mechanism could enable rapid sales of assets seized by the Russian state.
Dmitri A. Medvedev, deputy chairman of the Russian national security council, warned on September 15 that Russia would relentlessly pursue EU member states and “European degenerates from Brussels” who attempt to confiscate Russian property. He vowed to do so “until the end of time” and “by every means possible.” Medvedev added that Russia would pursue the Europeans “in all possible international and national courts” and, notably, “in some cases, even out of court.”
How far might Russia go?
Experts anticipate that the Kremlin could target European assets in Russia in response. This could involve “Type-C” accounts, which were established by Moscow to sequester the Russian earnings of foreign entities and individuals after the West froze its sovereign assets. Foreigners require Russian government approval to withdraw funds from these accounts.
Moscow could also seize and sell off the assets and shares of foreign companies operating in Russia. Since the war’s onset, Russia has already taken control of the operations of a number of European companies, including the Danish beer giant Carlsberg.
Alexander Kolyandr, a nonresident senior fellow at the Center for European Policy Analysis, suggested that Russia might mirror Europe’s strategy by issuing a loan against the assets held in Type-C accounts to bolster its strained state budget. While the exact total in these accounts is unknown, Kolyandr estimated it to be in the low tens of billions of dollars.
Another potential measure, Kolyandr noted, could be the expedited outright seizure of property or shares owned by individuals and companies from European nations supporting the Ukraine loan. The Bell, an independent Russian online publication, has estimated that the total value of Western assets at risk could amount to hundreds of millions of dollars.
President Putin warned in September that any European action to seize Russia’s sovereign assets “would utterly dismantle all tenets of international economic and financial activity, undoubtedly inflicting immense damage upon the global economy as a whole.”
Speaking in Minsk, the Belarusian capital, in June, the Russian leader stated that the West’s “theft” of Russia’s reserves would only accelerate the fragmentation of global financial systems. Russia has actively urged other nations to shift their trade away from dollars and euros and to develop alternative payment systems immune to Western influence.
“There’s constant discourse about their plans to steal our money,” Mr. Putin remarked. “But once that occurs, the movement toward regionalization of payment systems will accelerate and become, without a doubt, irreversible.” He concluded, “Perhaps it’s worth paying for.”
Jeanna Smialek contributed reporting from Brussels.