EU explores legal path to turn frozen Russian funds into Ukraine compensation

The European Union should explore confiscating frozen Russian central bank assets to compensate Ukraine for war damages, Economy Commissioner Valdis Dombrovskis said, emphasizing the need for bold measures. 

He downplayed concerns raised by the European Central Bank (ECB) about potential financial and legal risks, Caliber.Az reports citing foreign media.

“We certainly must explore and work on all options,” Dombrovskis stated in an interview on December 19. “There is an established principle under international law that the aggressor is liable for the damage it’s creating, so we must find ways to make Russia pay for the damage it is creating in Ukraine.”

The EU’s diplomatic service is reassessing the economic and financial risks of seizing Russian assets to aid Ukraine. The conversation has gained urgency as the bloc faces the possibility of reduced or halted US support for Kyiv following Donald Trump’s upcoming inauguration.

Thus far, the EU and G-7 nations have used profits from $300 billion in immobilized Russian assets to support Ukraine, including through a €50 billion ($52.5 billion) loan package. Euroclear, a Brussels-based clearinghouse holding €180 billion of Russian deposits, has expressed caution. Its CEO, Valerie Urbain, warned that confiscation could undermine state immunity under international law, destabilize the euro as a reserve currency, and threaten the euro area’s financial stability.

Despite these warnings, Dombrovskis emphasized that any approach must be “legally solid” to withstand legal challenges. He also argued that prior fears about financial instability from freezing Russian assets have proven unfounded.

“We already took an important step when we immobilized those assets, and there were questions on financial stability or implications for the euro,” he said. “But we see that those financial stability risks did not materialize.”

The EU has already pledged substantial support to Ukraine, including a €50 billion package for 2024–2027, separate from the G-7-backed loan. The bloc’s commitment to Ukraine extends beyond financial aid to discussions about boosting its military preparedness in light of Russia’s invasion.

Russia’s aggression has reignited debates within the EU over how to address decades of underinvestment in defence, which was largely reliant on NATO. While countries like Estonia and France advocate joint borrowing to bridge military gaps, Germany and the Netherlands oppose this approach.

Dombrovskis stressed the urgency of addressing defence needs before the EU’s next long-term budget in 2028.

“It’s clear that we need to be ambitious in strengthening our defence capacities and find the right funding tools at the EU and national level because the security threat is real,” he said. “Especially in a context where the Trump administration’s commitment to this is relatively unpredictable.”

By Tamilla Hasanova