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On Wednesday, the Kremlin issued a stern warning: any individuals or nations involved in the “theft” of frozen Russian state assets in Europe would face legal prosecution. This declaration coincided with European leaders gathering to discuss a proposal to loan Ukraine $165 billion, leveraging these very funds.
Dmitri S. Peskov, the Kremlin’s spokesperson, was unequivocal. He drew no line between outright seizure of Russia’s frozen assets and their proposed use as collateral for a loan to Ukraine, as advocated by senior European figures. “We are talking about theft,” Peskov asserted during a press call.
These remarks followed President Vladimir Putin’s recent decree to fast-track the redistribution of assets within Russia. Experts suggest Moscow might retaliate against the European loan plan by seizing assets belonging to foreign companies and individuals from supporting nations. Russia has already taken control of several Western companies’ operations, a move that reflects a wider shift in wealth during the ongoing conflict.
Last year, Russian Finance Minister Anton G. Siluanov stated that Russia had frozen Western assets equivalent to its own assets frozen by the West, signaling a symmetrical response from Moscow. Throughout the war, Russia has directed profits from these Western assets into special state-frozen bank accounts.
With U.S. aid to Ukraine diminishing under President Trump’s administration, European officials are increasingly focusing on Russia’s frozen funds. The European Union’s executive body is pushing forward a plan for an interest-free “reparations loan” of approximately $165 billion to Ukraine. This loan is cleverly designed to utilize Russian assets without directly seizing them, with repayment contingent on Russia compensating Ukraine for wartime damages. The United Kingdom is also exploring a similar initiative.
“A more structural solution for military support is essential,” stated Ursula von der Leyen, President of the European Commission, on Tuesday. “That’s precisely why I’ve proposed the concept of a reparations loan, leveraging immobilized Russian assets.”
Von der Leyen clarified that the loan would be distributed in installments and would not entail the direct confiscation of Russian assets. It’s worth noting that the Group of 7 nations has already extended a loan to Ukraine, secured by the interest generated from these same Russian assets.
This strategy to utilize the assets has gained momentum following von der Leyen’s initial proposal and a similar one last week from German Chancellor Friedrich Merz. Merz is currently facing criticism from a growing far-right opposition in Germany, who accuse him of spending German taxpayer money on Ukraine. However, the Prime Minister of Belgium, where the majority of Russian assets are located, has expressed opposition to the idea, citing significant risks for his nation.
Maria Shagina, a research fellow at the International Institute for Strategic Studies, described the situation as “a very interesting geopolitical turn.” She noted that given former President Trump’s isolationist foreign policy stance, “Europe needs to engage and implement a different strategy.”
What is Russia’s Response?
This shift in Europe is a highly unwelcome development for Russia, especially given President Putin’s long-standing efforts to bolster his nation’s financial stability.
The approximately $300 billion in Russian sovereign assets frozen by Western nations, primarily within the European Union and Britain, represent almost half of Russia’s Central Bank’s gold and foreign-exchange reserves. These assets were frozen in 2022, soon after Russia’s full-scale invasion of Ukraine.
Despite Europe’s attempts at a “financially engineered” loan rather than outright seizure, Russia evidently perceives this as a distinction without a meaningful difference.
Dmitri A. Medvedev, deputy chairman of Russia’s national security council, declared on September 15 that Russia would relentlessly pursue EU states and “European degenerates from Brussels” attempting to confiscate Russian property. He vowed to do so “until the end of time” and “by every means possible.”
He further stated that Russia would target Europeans “in all possible international and national courts” and, chillingly, “in some cases, even out of court.”
How Far Could Russian Retaliation Extend?
Experts suggest that the Kremlin’s retaliation could involve targeting European assets within Russia. This might include accessing “Type-C accounts,” where Moscow has sequestered the Russian earnings of foreign entities and individuals since the West froze its sovereign assets. Foreign access to these accounts currently requires explicit Russian government approval.
Another potential move by Moscow is the seizure and sale of assets and shares belonging to foreign companies operating in Russia. Since the conflict began, Russia has already taken control of several European company operations, such as the Danish beer producer Carlsberg.
Alexander Kolyandr, a nonresident senior fellow at the Center for European Policy Analysis, indicated that Russia could adopt a similar strategy: issuing a loan against the assets held in Type-C accounts to bolster its strained state budget. While the exact total in these accounts remains undisclosed, Kolyandr estimated it to be in the low tens of billions of dollars.
Kolyandr also suggested an expedited, outright confiscation of property or shares owned by individuals and companies from European nations supporting the loan to Ukraine. The independent Russian online publication, The Bell, has previously estimated that hundreds of millions of dollars in Western assets could be at risk.
In September, President Putin cautioned that any European action to appropriate Russia’s sovereign assets “would utterly dismantle all fundamental principles of international economic and financial operations, inevitably inflicting immense damage on the global economy as a whole.”
Speaking in Minsk, Belarus, in June, Putin asserted that the West’s “theft” of Russia’s reserves would only hasten the fragmentation of global financial systems. Russia has consistently urged other nations to shift their trade away from the dollar and euro, advocating for the development of payment systems impervious to Western influence.
“There’s continuous discussion about their intentions to steal our money,” Putin remarked. “But once that actually occurs, the shift towards regionalized payment systems will undoubtedly accelerate and become irreversible.”
He concluded with a provocative statement: “Perhaps it’s worth paying for.”
Reporting from Brussels contributed by Jeanna Smialek.