Listen: Austria’s bid to free Russian assets tests EU unity on sanctions

EU ambassadors are once again meeting in Brussels this Wednesday trying to agree on a new round of sanctions against Russia. But this time Austria, besides Hungary and Slovakia, has thrown a spanner in the works.

But why does Austria want to unfreeze money linked to sanctioned Russian oligarchs and where does that leave the rest of the EU? 

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EU ambassadors are once again meeting in Brussels this Wednesday trying to agree on a new round of sanctions against Russia. But this time Austria, besides Hungary and Slovakia, has thrown a spanner in the works.

Vienna is pushing for what it calls a “derogation”, a kind of legal exception, that would allow frozen Russian assets to be released under certain conditions. But why does Austria want to unfreeze money linked to sanctioned Russian oligarchs and where does that leave the rest of the EU? 

And here is the script:EU ambassadors are once again meeting in Brussels this Wednesday trying to agree on a new round of sanctions against Russia. But this time Austria, besides Hungary and Slovakia, has thrown a spanner in the works.

Vienna is pushing for what it calls a “derogation”, a kind of legal exception, that would allow frozen Russian assets to be released under certain conditions. But why does Austria want to unfreeze money linked to sanctioned Russian oligarchs and where does that leave the rest of the EU?

At the heart of it all is Raiffeisen Bank International, Austria’s biggest bank, and one of the few Western lenders still operating in Russia, as the EU Observer reports. After Russia’s full-scale invasion of Ukraine in 2022, the EU froze Russian oligarch Oleg Deripaska’s €2bn stake in the Austrian construction company Strabag. But Russian courts later fined Raiffeisen the same amount, €2bn, and said that the fine could be “paid” by handing over those frozen Strabag shares, you see what they did.

So, the problem is that EU sanctions make that impossible, unless, of course, Austria’s proposal passes. The plan would allow Austria’s authorities to release the frozen shares to Raiffeisen, supposedly as “compensation” for losses in Russia.

But other EU countries, including the Baltics, Poland, the Nordics, and the Czechs, see it differently. They say it’s a dangerous loophole that lets Russian oligarchs and courts manipulate sanctions for their own gain.

As one EU diplomat put it: “Now is the time to strengthen sanctions, not weaken them.”
Now, if the bloc allows one member state to bend the rules, even for what it calls “rational” reasons, it risks sending a clear message to Moscow: that pressure works, and exceptions can be negotiated.
Analysts warn that if Austria gets its way, other companies with frozen assets, from France, Italy, or Germany, could start demanding the same treatment. And that would be catastrophic for Europe’s unity on Russia.

Let’s not forget that European companies still hold between €70bn and €100bn in assets in Russia. If the EU starts unfreezing some of that, Russian courts could use similar tactics to grab even more Western assets in retaliation.

And while Austria argues it’s simply protecting its banking system, critics see something else, the return of old habits. Oleg Deripaska, after all, was a familiar face in Austria’s elite circles, with cosy ties to European politicians. So to many, this looks less like sound policy and more like a favour to old friends.

So what’s next?

Well the rest of Europe is debating how to actually use frozen Russian money, not return it. Belgium, which holds around €190bn in Russian central bank assets through its Euroclear system, is under pressure to back a plan that would use those funds to support Ukraine. The idea is to create a so-called “reparations loan”, about €140bn, with the profits from frozen assets used to finance Ukraine’s defence and reconstruction.

But Belgium’s prime minister, Bart De Wever, is nervous about it. He wants the other EU countries to share the legal risk in case Russia sues or refuses to pay reparations later.

Other leaders aren’t impressed because as one diplomat put it: “Belgium spent three years saying Euroclear is Belgian when it came to profits, now it wants to share the risks.”

So, on one hand, you have Austria trying to release Russian money. On the other, Belgium trying not to touch it without guarantees. And somewhere in between lies the European Union divided, hesitant, and still struggling to agree on how to hold Moscow accountable.