Use frozen Russian Central Bank assets to pay for peace in Ukraine

With multiple statements this week and last week signaling that the US will no longer prioritise European and Ukrainian security, Europe’s worst nightmare is becoming a reality.

There is no doubt that only a democratic, well-fortified, and well-armed Ukraine can guarantee lasting peace for Europe by deterring further Russian aggression. Achieving this will cost a lot. With the US unwilling to continue sharing the burden — and even suggesting that Ukraine should compensate for past aid — Europe must take a hard look at its available resources.

Since the immobilization of $300bn [€286bn] in Russian Central Bank assets, Russia has not only continued its genocidal war — inflicting nearly $500bn in losses on Ukraine — but has also escalated hybrid warfare globally. This includes sabotage, assassination attempts, cyberattacks, and election meddling in Europe, all while forging a coalition of tyrannies determined to dismantle the rules-based world order, with North Korean troops already on the ground.

Clearly, freezing Russia’s assets as a countermeasure has failed to deter its aggression, and Moscow’s ambitions extend far beyond Ukraine.

Given these new challenges, Europe must overcome its reluctance to make Russia pay for peace. A pragmatic way forward is to consolidate all immobilised assets into a new Brussels-based institution dedicated to Ukraine’s development — minimising risks to the Eurozone while ensuring that Russia bears the cost of its destruction.

Low-hanging fruit

A significant financial resource remains underutilized: the ungenerated profits from immobilised Russian Central Bank assets. That is a low-hanging fruit. 

In 2024, the EU introduced a plan to allocate windfall profits from assets immobilized in the Belgium-based securities depository Euroclear to Ukraine. The 2024 profits were mostly used for procuring weapons — including from French and Ukrainian manufacturers — while starting in 2025, they will be directed toward repaying the $50bn ERA loan.

Euroclear holds roughly half of all immobilised Russian assets, while the rest generate no returns for Ukraine at all.

Moreover, even Euroclear’s assets are not being utilised to their full potential for Ukraine. Since 2022, most of the initial bonds have matured, leaving the securities depository with substantial cash holdings it lacks the mandate or expertise to invest effectively, so it mostly keeps them on bank accounts in different countries. 

To address this, we propose the creation of a new institution — the Ukraine Development Bank — modelled after Germany’s KfW under the Marshall Plan.

This bank would consolidate Russian Central Bank assets from various jurisdictions, using the principal amount to pay compensation to victims and fund Ukraine’s reconstruction in the long term, while in the short term, maximising profits to pay off the ERA loan faster, procure weapons for Ukraine, and support its defence industries.

According to the latest financial reports of Euroclear, in 2024, interest arising on cash balances from sanctioned Russian assets before taxation was approximately €6.9bn. 

By doubling the principal available for investment and shifting to higher-yielding assets, the returns could significantly be boosted. As British investment banker and finance expert Timothy Ash has pointed out, "a portfolio of emerging market assets could generate a 10 percent yield, delivering over $30bn annually for Ukraine."

Maximising these profits would ensure stable, systematic procurement of European and American-manufactured weapons for Ukraine — both keeping Ukraine well-armed and helping to persuade Donald Trump to remain engaged in European security and defence while strengthening Europe’s own defence industrial base. 

As a compromise to address European concerns, the proposed Ukraine Development Bank could be headquartered in Brussels, aligning with Ukraine’s EU integration efforts. This would mitigate risks associated with a potential mass withdrawal of funds from Belgian jurisdiction while also increasing tax revenues for Belgium from the bank’s maximised profits.

To ensure transparency and accountability, the bank’s governance structure would include a Board of Directors representing the US, the EU and its member states, the UK, and Ukraine. The CEO — a Ukrainian national — would be selected through an open, transparent, and competitive process overseen by the board.

Risk to euro?

The strongest opposition to confiscation comes from European finance officials who narrowly focus on perceived risks to the euro. However, neither the initial immobilisation of assets that caused the main market shock nor the decisions on windfall profits and ERA loans have anyhow affected the euro’s attractiveness as a reserve currency.

More importantly, the cost of inaction must also be part of the financial discussion.

Former US deputy defense secretary Elaine McCusker has estimated that a Russian victory in Ukraine would force the U.S. to increase defence spending by at least $808bn over the next five years. The costs for European countries would be much higher especially if the US decides to withdraw from Europe. 

During the largest war since WWII, financial officials should not be the ultimate decision-makers on national security matters.

Meanwhile, some policymakers have floated the idea of returning the immobilised assets — partially or in full — to Russia as part of a potential peace deal.

That would be a disaster.

The $300bn exceeds two Russian annual war budgets for 2024. The Kremlin would immediately reinvest these funds into bombs, tanks, and artillery rounds for the next phase of its wars of aggression. 

Instead, it is far wiser to put this money to work for peace — using its profits to procure German air defences, French and British missiles, and American shells, rather than allowing Russia to funnel an entire amount into drone production in Tatarstan or buying millions more artillery rounds from North Korea.

For European leaders, moving forward with confiscation now is not just prudent — it is a strategic necessity.

By doing so, they can take on a much greater share of supporting Ukraine without significantly overburdening their own taxpayers.

Denying Ukraine the resources it needs for strategic armament, reconstruction, and victim compensation risks depopulation, social resentment, and ultimately, leaving Ukraine vulnerable to further Russian conquest — that would not make Europe safe again.