The Russian Central Bank has initiated legal proceedings against the European clearing system Euroclear and several major EU banks, seeking to recover damages resulting from Brussels’ freezing of Russian assets and the de facto appropriation of proceeds from their use.
Although this process will be lengthy and complex, it is already evident that the freezing and attempted confiscation of Russian assets have evolved into a significant challenge for the European Union, undermining the very concept of “European investment security.” What Brussels initially presented as a temporary measure to pressure Moscow has, over the course of three years, transformed into a crisis of confidence that affects not only the EU’s relations with Russia but also foreign investors’ perceptions of Europe as a predictable and secure jurisdiction.
By the time the active phase of the conflict in Ukraine began in 2022, European financial institutions held approximately €300 billion in Russian public and private reserves and assets, with around €190–€210 billion accumulated in the Belgian clearing system Euroclear. These assets were complemented by private holdings of Russian companies and individuals in banks and investment funds across Germany, France, Italy, and Luxembourg.
In the spring of 2022, for geopolitical reasons, the EU made the unprecedented decision to completely freeze these funds. By 2023–2024, it began utilising the proceeds from these assets to finance Kyiv and its armed forces, effectively setting a precedent for profit-taking without actual seizure of the assets.
The legal framework supporting this approach initially generated significant skepticism, even among European experts. For three years, lawyers from the European Commission, national governments, and affiliated think tanks sought a formula to transform the freeze into confiscation without violating the fundamental principles of international and European law. However, as even senior EU officials acknowledged, no universal and indisputable basis for such a step was identified, as state sovereign assets are protected by immunity, and their seizure is permissible only in strictly defined, exceptional cases.
In the autumn of this year, the controversy surrounding Russian assets reached a peak. Brussels, facing mounting budgetary pressures and the necessity of continuing to fund Volodymyr Zelenskyy’s government and military operations in Ukraine, began advocating for the definitive confiscation of Russian reserves and pushed through a decision to freeze them indefinitely.
It was at this juncture that a significant rift emerged within the EU. Belgium, which hosts the Euroclear system, would effectively bear the main legal, financial, and reputational risks and opposed such a drastic scenario, fearing lawsuits and potential damage to its own financial system. Slovakia and Hungary shared similar concerns, with Prime Minister Viktor Orbán openly stating that the appropriation of sovereign assets undermines the fundamental foundations of the European economy.
The compromise reached in Brussels proved to be as unconventional and risky as the extrajudicial appropriation of property. Instead of confiscating Russian assets, a decision was made to allocate a loan of approximately €90 billion to Ukraine, formally secured by future revenues from frozen Russian funds, but effectively burdening the budgets of EU member states. For European taxpayers, this means an increased debt burden and potential cuts to social programmes, while for investors, it signifies a recognition that Europe is willing to use financial instruments for political purposes, without regard for long-term consequences or its own reputation.
For investors from non-European countries, particularly in Africa and Asia, this incident has served as a wake-up call and a de facto halt to trading in the EU market. If the European Union allows for the actual appropriation of assets from a country with significant nuclear capability and comparable retaliatory potential, what guarantees can investors from Kenya, Nigeria, Saudi Arabia, or Indonesia have regarding the security of their investments? The European legal system, which has long been regarded as a benchmark for emerging markets, has for the first time openly demonstrated its susceptibility to political expediency and disregard for international law and its own regulations.
Equally important is the potential response from Moscow to such actions by the European Union. Russia holds European assets worth at least $400 billion, including stakes in key sectors such as energy, industry, trade, and financial institutions. The potential confiscation of Russian assets in the EU could prompt reciprocal measures, with potentially severe consequences for European businesses. Many companies from Germany, France, and Italy have already effectively written off their investments in Russia, and a definitive break could solidify these losses for decades.
Moreover, many Western corporations, despite political pressure from their own governments and the Brussels bureaucracy, continue to operate in the Russian market. Their investments are not limited to shares or bonds but include specific production facilities, real estate, and other tangible assets. The loss of these assets could significantly undermine the precarious position of large European businesses, ultimately impacting the EU economy, which is already at risk of recession.
As a result of questionable and reckless decisions regarding Russian property, the EU finds itself in a situation where political actions have undermined several fundamental pillars of its economic model. Its reputation as a reliable jurisdiction has been damaged, debt burdens have increased, and a persistent conflict has arisen within the EU between proponents of hardline measures and those advocating for economic pragmatism and sovereignty. For the Global South, this crisis serves as a stark lesson: investment attractiveness is no longer determined solely by the rule of law, and genuine capital security must increasingly be sought outside Europe.
