Why frozen Russian assets in the EU may not go to Ukraine
From the first weeks of the Russian Federation’s full – scale aggression against Ukraine, special attention was focused on the assets of Russian oligarchs and companies.
However, for a long time, these assets remained untouched, and the only case of confiscation. The last two weeks, however, have brought progress in the area of private Russian assets.
Even more significant was the news that the Belgian central depository, Euroclear, will pay about $3.4 billion to European investors as compensation for losses caused by the blocking and illegal confiscation of their assets in Russia.
Read more about why this decision is both a positive signal and a challenge for Ukraine in the article by Ivan Horodyskyi, Director of the Dnistryanskyi Center: Compensation not for Ukraine. Why confiscated Russian assets may never reach Kyiv.
Unlike Ukraine's Western allies, Russia is acting much more decisively regarding the assets of European investors under its jurisdiction.
Several well – known companies fell under repression: Danone, Carlsberg, and the energy concerns Fortum (Finland) and Uniper (Germany). Their assets in Russia were placed under "temporary administration" by entities linked to the Russian elite, including Chechen leader Ramzan Kadyrov and First Deputy Prime Minister of Russia Denis Manturov.
Subsequently, Danone and Carlsberg were effectively forced to sell their Russian assets at a significant discount.
The Kremlin is attempting to present these actions as a "mirror" response to the freezing of Russian assets in the EU. However, while the EU’s measures were a reaction to Russian military aggression against Ukraine and targeted individuals recognized as being connected to the Russian authorities, Moscow’s actions are openly repressive and justified solely by the fact that the businesses belong to citizens of "unfriendly countries."
The recent EU decision on the potential confiscation of private Russian assets indicates that such behavior by Russia is no longer viewed as acceptable and calls for a clear and asymmetrical response.
One of this month’s major diplomatic bombshells was the EU’s announcement that it would use Russian assets to compensate European investors.
According to Reuters, Euroclear – the primary global administrator of frozen Russian assets – has decided to seize and redistribute around 3 billion euros, based on authorization granted by the Belgian regulator back in March. The funds will go toward compensating investors who lost assets in Russia as a result of expropriation.
It is important to emphasize that this decision applies only to frozen private Russian assets.
In contrast, the reserves of the Central Bank of the Russian Federation – amounting to about 200 billion euros and held in a Belgian bank – remain untouched.
Nevertheless, this step by the EU is unprecedented: until now, the only legal pathway to confiscate private Russian assets was through a court decision in the context of criminal proceedings for tax evasion, support for aggression, or sanctions evasion.
However, for Ukraine, this decision presents both new opportunities and new challenges.
Russia still holds the assets of thousands of European companies, including major banking groups such as Raiffeisen, OTP, and ING. Their potential influence on their respective governments – demanding compensation from frozen Russian assets – could be substantial.
At the same time, frozen private assets will be insufficient, so sooner or later, the issue of confiscating Russian sovereign assets to cover the losses of European businesses will inevitably arise.
That is why Ukraine must seize on this precedent to intensify pressure on the EU – specifically, to demand the transfer of frozen Russian assets to an international compensation mechanism.
This pressure must be clearly justified, above all, by moral and legal arguments: Compensating victims of aggression is a far more legitimate goal than reimbursing the losses of companies that knowingly operated in the Russian market.