Within days of the Russian invasion of Ukraine in February 2022 Western countries moved to freeze Russian Central Bank funds in these countries. This was followed by proposals to permanently confiscate these frozen assets to pay for the reconstruction of Ukraine. As of late 2025, the legality of such expropriation remains untested and heavily disputed.

In March 2023 (prior to the destruction of the Kakhovka Dam) a joint assessment was released by the Government of Ukraine, the World Bank, the European Commission, and the United Nations, estimating the total cost of reconstruction and recovery in Ukraine to be US$411 billion (€383 billion). This could eventually exceed $1 trillion (€911 billion), depending on the course of the war. The Kyiv School of Economics has a project and website dedicated to detailing the damages the war has caused to Ukraine.

The G7 countries plus the European Union announced in May 2023 that the approximately $300 billion (€275 billion) in Russian Central Bank assets that had been frozen in these countries would remain frozen "until Russia pays for the damage it has caused to Ukraine," and this was reaffirmed after the G7 meeting in December, 2023. This constituted about half of the $612 billion (€560 billion) total foreign currency and gold reserves held at that time by the Central Bank of Russia. By late July 2023, the amount of frozen Russian assets held in these countries was estimated at $335 billion (€300 billion). Most frozen assets, by far, reside in Europe ($217 billion (€201 billion) to $230 billion (€210 billion)), with the United States holding just a small portion ($5 billion (€4.5 billion)) and Japan also holding some. Josep Borrell, EU's foreign affairs chief, said he wants EU countries to confiscate the frozen assets to cover the costs of rebuilding Ukraine after the war. Russian deputy foreign minister Alexander Grushko remarked that Borrell's initiative amounted to "complete lawlessness" and said it would hurt Europe if adopted.

Austrian foreign minister Alexander Schallenberg warned that confiscation of Russian assets that does not have a "watertight" justification would be an "enormous setback, and basically a disgrace" for the EU. Russia has threatened to retaliate by confiscating assets owned by the EU.

In October 2024, the G7 countries finalized a plan to loan $50 billion (€47.5 billion) to Ukraine, backed by the more than $3 billion (€2.8 billion) in interest that is earned annually by the frozen assets. The United States will contribute $20 billion (€19 billion) of this, with the remainder coming from the European Union, Britain, Canada and Japan. Belgium's foreign minister, Maxime Prévot, has been reported to have rejected proposals to increase the income earned by the assets by switching to riskier investments.

In February, 2025, three sources told Reuters that Russia has signaled a willingness to use the frozen assets for reconstruction in Ukraine as long as part of it is spent on the one-fifth of the country that Moscow's forces control.

In October 2025, European leaders convened to discuss making an interest-free "reparations loan" of 140 billion euros, or about $165 billion, to Ukraine, financially engineered to make use of the Russian assets without seizing them outright. The loan would be repaid only if Russia compensated Ukraine for the damage caused during the war. The prime minister of Belgium, Bart De Wever, where most of the Russian assets are held, has opposed the idea because of the risk to his country. The U.K, which holds Russian assets valued at around £25 billion ($33.5 billion), is considering a similar scheme. On December 3, 2025, the European Commission published a proposal to use frozen Russian assets — of which approximately €210 billion ($245 billion) are held in Europe — as collateral for an initial €90 billion loan to Ukraine, with the prospect of future increases. On December 12, 2025, EU countries agreed to indefinitely freeze Russian funds held in Europe. This decision means that €210 billion will remain frozen until Russia ceases its military actions in Ukraine and begins to rebuild what has been destroyed. On December 19, 2025, EU leaders agreed to borrow funds to provide Ukraine with €90 billion loan to finance its defence over the next two years, foregoing the immediate use of frozen Russian assets. Instead, the European Commission has been tasked with further developing a so‑called reparations loan based on Russia’s frozen assets, but for now this mechanism has proved unworkable, primarily due to resistance from Belgium, where most of these assets are held.

There is a legal distinction between private assets, such as the yacht of a Russian oligarch, and state assets. Private assets are relatively easy to freeze — for example if it is suggested that the individual has been 'obtaining a benefit from or supporting the government of Russia'.

However, it is much more difficult to seize (confiscate) state assets. Ordinarily, it must first be proven that they constitute the proceeds of crime. Sanctions evasion is such a crime but only the portion of the assets involved in the evasion can be seized. With respect to confiscation of frozen Russian state assets, the difficult problem is how to do it without violating international treaties concerning the protection of cross-border investments, and without violating the principle that laws and regulations cannot be retroactive. Russia's rights also include those under sovereign immunity, which forbids one state from seizing another's property. It is cautioned that doing so could create dangerous precedents. Risks also include aggravating the suspicions of the Global South, to whom it may seem that double standards sometimes apply when the interests of Western countries are at stake, and substantiating the view that the West is turning the international financial system into a weapon of war.

Euroclear

Euroclear Bank, the central securities depository based in Belgium, holds frozen Russian assets variously estimated at €125 billion ($137 billion), €180 billion ($197 billion), and €190 billion ($208 billion). Euroclear generated €3 billion ($3.28 billion) in profits from these assets in the first nine months of 2023. Belgium anticipates 2023 tax revenues of €625 million ($684 million) on the income generated by frozen Russian assets and €1.7 billion ($1.86 billion) in 2024. According to Belgian prime minister Alexander De Croo, 100% of this tax revenue should go directly to Ukraine. This level of taxation falls far short of the level contemplated by the European Commission and others, which are said to involve distributing to Ukraine some portion of the profits generated by the frozen assets. Another European clearinghouse holding frozen Russian assets, Clearstream, is in Luxembourg. Both Belgium and Luxembourg have asked for assurance that they will not be required to bear all the risks that may attend European action against these assets. The argument has been made that using Euroclear to seize Russian assets fuels financial fragmentation by encouraging non-G7 countries to switch to non-Western alternatives to Euroclear, such as China Securities Depository and Clearing Corporation, in order to protect their assets, making it harder to police sanctions on Russia, as well as harder to track financial transactions of groups involved in activities such as terrorism or nuclear proliferation.

Legality of confiscation of state assets

In September 2023, the Renew Democracy Initiative (RDI) released a report (lead author Laurence Tribe) which concluded that Russia's arguments against confiscating its frozen state assets and transferring them to Ukraine have no validity, either practically or under U.S. or international law. According to Tribe, "There is simply no basis for saying Russia can violate Ukraine's sovereignty while invoking its own sovereignty as an inviolable shield." The report argues that confiscation of Russian assets would be permissible under the international doctrine of "countermeasure", according to which an action (such as confiscation) that would ordinarily violate international law is permissible if it is undertaken with the aim of inducing another state to resume compliance with international law and is conducted in accordance with the requirements of the Articles on the Responsibility of States for Internationally Wrongful Acts (ARSIWA), which "are considered by courts and commentators to be in whole or in large part an accurate codification of the customary international law of state responsibility". According to the report, since a strong showing can be made that Russia has violated fundamental international laws, confiscation is an appropriate countermeasure to induce it to comply with its international obligations.

Other organizations have proposed a number of methods that can be used to confiscate the frozen assets, based either on countermeasures or on the enforcement of international judgments against Russia.

On 12 January 2024 Russia was said to be close to initiating legal proceedings to challenge in court the freezing of its frozen central bank assets. Russians believe that such litigation "could last for decades", and in the interim would block any transfer of the assets to Ukraine.

Countermeasures must be temporary and reversible

An article in Foreign Policy disagrees that confiscating Russian frozen assets and delivering them to Ukraine would constitute a valid countermeasure. It points out that the purpose of a legitimate countermeasure is to induce compliance with international law and not to act as punishment for violations. As such, it must be temporary and capable of being reversed if the violating country resumes its compliance with international law. Confiscation, however, is aimed not at inducing Russia to stop its aggression but at compensating for the injury it has caused. Once Russian assets have been transferred to Ukraine they can no longer be returned to Russia, rendering the countermeasure permanent, and its purpose punitive. This is the prevailing view and it has much support.

Others assert that this errs in its assumption that the sole function of countermeasures is to induce compliance with international law, insisting that this is contradicted by Comment 1 to Article 22 of ARSIWA, which says, 'In certain circumstances, the commission by one State of an internationally wrongful act may justify another State injured by that act in taking non-forcible countermeasures in order to procure its cessation and to achieve reparation for the injury...' (emphasis added). Therefore, according to this argument, the correct dichotomy is not between inducing compliance and achieving reparations, but is between countermeasures that make the injured state whole and those that impose punishment. Consequently, the ARSIWA requirement that countermeasures be reversible 'as far as possible' means that after Russia complies with its obligation to compensate Ukraine for the damage it caused it should no longer face countermeasures. Reversibility does not require that after Russia's compliance its compliance must be undone (by reversing its reparation to Ukraine), according to this argument.