Introduction
The material and human devastation resulting from Russia’s full-scale invasion of Ukraine in February 2022 has reached catastrophic levels, necessitating an unprecedented scale of international financial response. International assessments estimate Ukraine’s rehabilitation and recovery needs over the next decade at approximately $588 billion. In stark contrast, the European Union’s current strategy focuses on the immobilisation of approximately €210 billion in Russian Central Bank assets held within Union jurisdictions. While the Union has mandated central securities depositories to set aside the extraordinary revenues generated by these assets – directing them toward Ukraine’s defence and rehabilitation through the Ukraine Loan Cooperation Mechanism – these yearly earnings amount to roughly €3–5 billion, compared with the broader financial support packages now being mobilised for Ukraine, including a planned €35 billion macro-financial assistance loan and a wider €90 billion loan framework for 2026–2027 in frames of the Mechanism. Such figures are structurally insufficient to overcome the widening financing shortfall.
This fiscal gap has sparked a high-stakes institutional and legal debate. The European Central Bank (ECB) and several Member States have raised concerns that confiscating sovereign assets could undermine confidence in the euro, create systemic financial risks, and violate principles of sovereign immunity. Conversely, the European Commission and the European Parliament argue that the Union must transition from passive immobilisation to active confiscation. This analysis contends that the EU must lawfully seize Russian Central Bank assets. Such action is not only a geopolitical necessity for strategic autonomy but is also supported by international countermeasures law and the EU’s internal legal competences under the Common Foreign and Security Policy (CFSP) and the Treaty on the Functioning of the European Union (TFEU).
The International Legal Justification
Firstly, the confiscation decision is justified because of the European Union’s mandate under Article 21 TEU to uphold the international rules-based order when global enforcement mechanisms are paralysed (European Union, 2016).
Namely, as a supranational actor with an international legal identity, the EU is mandated by Article 21 TEU to ensure its external acts “preserve peace, prevent conflicts and strengthen international security, in accordance with the purposes and principles of the United Nations Charter”. Moreover, the International Law Commission’s Articles on State Responsibility (ARSIWA, Articles 49-54) contain the doctrine of countermeasures, including suspending obligations like sovereign immunity, to compel compliance. It even intentionally leaves the status of “third-party” countermeasures to customary law. Hence, the EU needs to act when the UN Security Council is immobilised by an aggressor’s veto.
Nevertheless, certain Member States and the European Central Bank claim that sovereign immunity remains an unquestionable basis of customary international law. They contend that ARSIWA mandates countermeasures be temporary and reversible, so permanent confiscation would exceed the EU’s powers. From this perspective, such actions risk portraying the Union as a “rule-breaker,” potentially creating internal rule of law issues, provoking retaliatory lawsuits, or triggering capital flight, which could destabilise the Eurozone.
However, this viewpoint confuses state-level countermeasures (executive foreign policy) with judicial immunity (protection from court jurisdiction). The legal history of the EU, particularly the Kadi case, shows that the Union may put its core principles ahead of constraining international formalities. Furthermore, the “reversibility” provision of ARSIWA is qualified as “as far as possible“, acknowledging that the requirement to restore the status quo is subordinate to the primary objective of obtaining legally owed reparations. Confiscation is a justified and necessary form of economic statecraft, as Russia has not compensated for the reconstruction of Ukraine. Therefore, the EU’s countermeasures are a crucial institutional defence, aligning with its evolving role as a proactive geopolitical actor.
EU Institutional Competence
Secondly, beyond international countermeasures law, the EU has the internal authority to implement confiscation by bridging the Common Foreign and Security Policy with Internal Market legislation under Articles 29 TEU and 215 TFEU.
The EU uses a dual-step sanctions system ranging from asset freezes to confiscation. First, a unanimous Council decision under Article 29 TEU defines restrictive measures toward third countries. Second, a Regulation under Article 215 TFEU permits the Council to adopt, by qualified majority, the necessary measures for CFSP objectives throughout the Internal Market, guaranteeing uniform application and preventing fragmentation, upon proposal from the High Representative and Commission. Furthermore, this EU jurisdiction has been reaffirmed by the Court of Justice of the European Union, which confirmed Article 215(2) TFEU as the legal foundation for economic penalties, even when they target specific entities rather than entire states. Also, the Court acknowledged the Council’s wide latitude to implement restrictive measures in order to accomplish CFSP goals, including re-establishing global peace and security, as seen in the Rosneft case. This precedent affirms the EU’s authority to escalate immobilisation into confiscation if necessary.
However, critics, such as the Belgian government and the clearinghouse Euroclear, argue that Article 215 TFEU was meant for restrictive measures that are, by definition, transient and reversible. They contend that permanent confiscation of sovereign assets goes beyond this authority and puts the CJEU at risk of making an ultra vires (reaching beyond one’s powers) ruling. The legal stability of the EU’s financial institutions would be threatened by an escalation to seizure in the absence of a special treaty modification.
Nevertheless, it is important to remember that Article 215 does not restrict the scope or type of “necessary steps” in order to allay these worries. Sanctions’ transient nature is a policy decision rather than a legal requirement. Consequently, judicial scrutiny would probably concentrate on proportionality rather than outright banning the measure. Thus, the EU can legitimately function within the CFSP-TFEU framework by framing confiscation as restitutionary debt recovery.
The Evolution toward a “Geopolitical” EU and Strategic Autonomy
Thirdly, building upon the established legal competences of the Union, the transition from passive immobilisation to active confiscation represents the necessary fulfilment of the EU’s broader evolution from a “civilian power” toward a geopolitical actor seeking strategic autonomy.
Historically, the EU was referred to as a “civilian power,” emphasising market-based multilateralism and normative influence. However, a qualitative movement toward strategic autonomy (the Union’s ability to carry out foreign policy autonomously to protect its interests and values) has been accelerated by Russia’s aggressiveness. The EU’s Strategic Compass, which promotes a united EU presence and action on the world stage, institutionalises the Union’s ambition to act strategically and credibly in response to threats. Complementary to this, a European Parliament resolution has identified the completion of legal procedures related to the confiscation of frozen assets as a goal of EU policy towards Ukraine. Moreover, the European Commission and the EEAS have pushed beyond the conventional intergovernmental CFSP model to become the de facto architects of economic statecraft.
However, intergovernmentalist critics contend that the EU does not have the institutional authority to use confiscatory tools. They argue that permanent seizure turns a diplomatic instrument into a judicial enforcement mechanism, overstretching the CFSP authority. They contend that supranationalising these capabilities jeopardises the sovereign competencies of Member States and that these powers have historically belonged to national sovereign courts or military coalitions.
In contrast, the practical growth of EU foreign policy implies that Brussels has already outgrown the narrow civilian power model. The realisation that the Union needs to take decisive action in a competitive geopolitical context is reflected in the institutionalisation of the Strategic Compass. Moreover, the institutional shift – wherein the Commission takes the lead in designing sectoral sanctions – demonstrates an internal framework that has adapted to exigent external challenges. Hence, this trend shows that a confiscatory measure, portrayed as an instrument for geopolitical restitution, is a logical and essential extension of the Union’s developing competence in global affairs.
The Failure of the “Ukraine Facility” and MFF Constraints
Fourth, for the Union to remain a joint geopolitical player, it must be supported by a resilient financial architecture that bypasses the structural limitations of the EU’s Multiannual Financial Framework through the confiscation of Russian assets.
The adaptation of the €50 billion Ukraine Facility in 2024 indicated that the EU budget is at a political and legal breaking point. However, a single Member State was able to withhold aid for months by using its veto power against unrelated disagreements on rule-of-law conditionality because changes to the Multiannual Financial Framework (MFF) require unanimity. This vulnerability demonstrates that it is politically unsustainable to rely on conventional EU “own resources” for an extended fight. The scale of recent commitments underscores this pressure, with the Union considering up to a €90 billion Ukraine loan package for 2026–2027 to maintain long-term macro-financial stability. Through the External Assigned Revenue (EAR) mechanism, confiscation provides an escape route. Funds coming from outside the Union for a particular purpose are exempt from the MFF expenditure ceilings under Article 21 of the EU Financial Regulation. In order to promote the Ukraine Loan Cooperation Mechanism, the European Commission has previously established a technical precedent by designating the “windfall income” from frozen assets as EAR. Expanding this budgetary method to principal capital creates a consistent, veto-proof financing stream for Ukraine.
However, the European Court of Auditors argue that the expansion of off-budget tools compromises the Community Method and oversight by the European Parliament, resulting in an opaque, unaccountable shadow budget that erodes democratic control over EU spending.
In response, the EU’s foreign policy struggle poses the biggest challenge to its democratic credibility. As described before, under the current structure, a single government (such as Hungary under Victor Orbán) can use the budget as a weapon to force domestic concessions, using Ukraine’s survival as leverage. In order to maintain the Union’s ability to act collectively, the strategy of using the External Assigned Revenue mechanism makes use of the legal flexibilities found in the Financial Regulation rather than breaking EU law. By shielding Ukraine aid from the veto power, the EU ensures that, in a time of internal political division, its external action continues to be credible and functional.
The ECB vs. The Commission
Fifthly, the risk of undermining the Eurozone stability because of the confiscation is exaggerated, since the tension between the EU’s political mandate and the ECB’s monetary independence can be navigated.
Critics believe that, if the EU decides to confiscate Russian assets, the ECB’s legitimacy and the Euro’s neutral character will be compromised by politically motivated usage of sovereign assets. Investor trust may decline if the ECB seems to be in line with geopolitical goals, which would endanger the Euro’s standing as a dependable worldwide reserve currency. Such actions could be viewed by markets as improper political meddling in monetary matters, which could jeopardise the financial stability of the Eurozone.
To counter this, it is necessary to understand the EU institutional structure: it makes a clear distinction between its foreign policy and monetary mandates. The ECB is empowered to pursue its major goal of preserving price stability under Article 130 TFEU. The European Parliament emphasises that in order to maintain its independence, the ECB must abstain from political activity. The ECB’s recent rejection to support a proposed €140 billion reparations loan, citing treaty restrictions and threats to monetary credibility, demonstrated this technical concentration. Nonetheless, under Articles 15 and 21 TEU, the European Council and Commission have a higher political mandate to specify and pursue external measures that promote international law, peace, and security. And while the ECB’s secondary mandate allows it to support “general economic policies,” it cannot veto the strategic geopolitical imperatives defined by the Union’s elected leaders. And this conflict is not a complete ban on activity, but rather a conflict between sources of legitimacy. The Council and Commission hold the Union’s democratic legitimacy, whilst the ECB has specialised technical legitimacy. The political branch is still allowed to pursue foreign policy objectives as long as the ECB’s operational independence in determining interest rates is maintained. Additionally, the EU guarantees a fair playing field, which lessens the impression of unilateral instrumentalisation by operating within a G7 framework. Hence, the EU can carry out its political mandate through strategic collaboration without jeopardising the Eurozone’s long-term stability.
Subsidiarity and the “Euroclear” Liability Problem
Lastly, confiscation should be implemented at the Union level, because only a coordinated EU framework can lawfully manage Russian assets, distribute risk across Member States, and ensure strategic support for Ukraine.
Belgium is currently exposed to excessive legal and security risks due to the approximately €195 billion in Russian sovereign assets held at Euroclear in Brussels. Belgian authorities have threatened additional retaliatory actions, and the Bank of Russia has already filed proceedings in Moscow to recover damages for these blocked holdings. Critics argue that a unilateral Belgian response would expose one Member State to asymmetric pressure while the rest of the Union would gain from the strategic immobilisation of these assets. However, the principle of subsidiarity, as stated in Article 5(3) TEU, requires Union involvement when Member States are unable to adequately accomplish goals on their own, which is why the confiscation should be implemented at the Union level.
Nevertheless, critics also argue that an EU-level mandate for confiscation violates subsidiarity by intruding into areas that are typically handled by national courts, potentially placing national institutions in precarious legal situations that jeopardise the stability of domestic finances.
However, the subsidiarity requirement is fully satisfied in this instance since Euroclear may obtain collective legal cover only through collective action. In order to strengthen EU strategic cohesion and guarantee that geopolitical blame is distributed throughout the bloc rather than being held by Belgium alone, legal challenges are targeted at the Union’s unified personality rather than a single state.
Conclusion
The European Union must transition from the passive immobilisation of Russian Central Bank assets to their legal confiscation. The current policy of skimming “windfall profits” is both mathematically insufficient to meet Ukraine’s needs and legally inconsistent with the Union’s evolving mandate as a geopolitical actor. Confiscation is justified under international countermeasures law and the EU’s Article 21 TEU mandate; it is enabled by the CFSP–TFEU legal framework; it is necessary to overcome the paralysis of MFF financing constraints; and it is institutionally feasible without undermining the ECB’s independence or the principle of subsidiarity.
Ultimately, the choice to forfeit these assets is a test of the Union’s strategic autonomy. By putting the political legitimacy of the Council and Parliament ahead of technocratic prudence, the EU can safeguard its Member States from asymmetric risks and guarantee a predictable reparations process for Ukraine. To maintain its credibility as a normative power, the Union cannot hide behind legal technicalities while the international order is being undermined.
