By Leon Vermeulen, Substack, 9/24/26
The EU’s latest attempt to gain control of Russia’s frozen reserves does not eliminate the legal liability. It transfers that liability from Belgium to the whole European Union—including countries that may vote against the plan.
Ukraine needs more money.
The European Union’s €90 billion financing package for 2026 and 2027 is no longer considered sufficient. Kyiv says it needs an additional €27 billion for defence in 2026, with another substantial shortfall expected in 2027.
The approximately €210 billion in frozen Russian Central Bank assets held within the EU have therefore returned to the political agenda. Most of the money is administered by Euroclear, the Belgian financial institution responsible for safeguarding and settling trillions of euros in international assets. Belgium has consistently resisted attempts to use the Russian principal. It fears litigation, Russian retaliation, damage to Euroclear and a broader loss of confidence in the euro.
Brussels has now been presented with a possible solution: move the Russian accounts out of Euroclear and into a new EU institution.
Three former senior officials proposed the idea in August. A cross-party group of 122 members of the European Parliament has subsequently called for its urgent consideration. The transfer, they argue, could be authorised under Article 122 of the EU treaties, which permits emergency economic measures without requiring the unanimous support of all member states. The new EU institution would become the custodian and assume “all legal obligations to the Central Bank of Russia.”
That language tells us almost everything we need to know.
Moving the liability
The proposal does not establish that Russia has ceased to own the assets. On the contrary, it acknowledges that Russia retains a legal claim.
Euroclear currently records the Russian money as a liability. If sanctions are eventually lifted, the Central Bank of Russia can demand repayment. Euroclear is presently prohibited from paying Russia, but the debt itself has not disappeared.
Normally, Euroclear could not simply transfer that obligation to someone else without the creditor’s consent. Russia would hardly volunteer to have its claim moved into an EU-controlled vehicle created to finance Ukraine.
Brussels must therefore use legislation to compel the transfer, remove the liability from Euroclear and place it on the European Union. That may reduce Belgium’s immediate exposure. It does not solve the underlying legal problem. It merely shares that problem among the 27 member states.
If the EU institution held the assets intact, it might reasonably be described as a new custodian. But that would produce no money for Ukraine.
If it lent or spent the principal while leaving Russia with a theoretical promise of eventual repayment, the arrangement would become confiscation in everything but name. A custodian safeguards another party’s property. It does not consume that property and replace it with a politically conditional promise.
The legal doubts have not disappeared
At the end of 2025, the European Central Bank refused to provide a financial backstop for an earlier €140 billion reparations-loan proposal. It concluded that such involvement would breach the EU prohibition on monetary financing.
ECB President Christine Lagarde later described a revised proposal only as coming “closest” to compliance with international law. That was not confirmation of legality. It was a carefully qualified warning that the legal boundary had nearly—but not certainly—been reached.
Belgium remained unconvinced. So did Euroclear.
Euroclear’s chief executive, Valérie Urbain, warned that anything resembling confiscation could violate the international-law protections applying to sovereign assets. She even declined to rule out legal action against EU institutions if Euroclear’s legal and fiduciary duties were compromised.
The latest proposal does not produce a favourable court judgment or create a newly recognised exception to sovereign immunity. It constructs another institutional route to the same money while moving the resulting liability elsewhere.
Brussels may call this legal innovation. International investors may call it circumvention.
Who pays if Russia wins?
This is the question that must be answered before any vote takes place. Suppose the EU transfers the assets to its new custodian and then lends or spends the money. Years later, a competent court rules that the assets must be returned to their legal owner.
Who produces the €210 billion?
Ukraine is extremely unlikely to repay it. Euroclear is supposed to have been released from the liability. Belgium is supposed to have been protected. The new EU custodian will have no independent reserve large enough to satisfy the judgment because the money will already have been used.
The bill would therefore return to the European Union.
The EU would have to recapitalise the custodian, draw upon member-state guarantees, use the EU budget or borrow additional money. Whichever mechanism was chosen, the ultimate burden would fall upon member states and their taxpayers.
This risk is not hypothetical speculation. During the debate in December 2025, one draft offered Belgium and other countries holding Russian assets unlimited protection against successful Russian claims. It proposed “unconditional, irrevocable and on-demand” guarantees ensuring that the Russian Central Bank could be repaid if necessary.
Several governments objected precisely because the guarantee was uncapped.
The Commission therefore understood the problem. If the assets were used and a court later required their restitution, somebody would have to replace the money.
The proposed change of custodian does not eliminate that liability. It moves it from Euroclear’s balance sheet to Europe’s public balance sheet.
Outvoted when the money is taken—charged when it must be returned
Article 122 introduces an even more troubling issue. Because a decision under Article 122 does not require unanimity, member states opposing the transfer could be outvoted. But once an EU regulation has been validly adopted, it normally binds the entire Union.
A government voting against the use of the Russian assets would not necessarily escape the financial consequences. Unless the final legislation specifically exempted dissenting countries, they could still be required to contribute through the EU budget, national guarantees, higher future contributions or repayment of additional EU borrowing.
Hungary, Slovakia, Belgium or another opposing state could therefore be outvoted when the assets were taken—and later charged for returning them. This is not merely a legal curiosity. It is a serious question of democratic and fiscal legitimacy.
A qualified majority could impose a contingent liability approaching €210 billion upon every member state, including those that explicitly refused to accept the risk. National taxpayers might inherit an obligation that their own governments opposed and their national parliaments never approved.
Article 122 may allow the Council to make an emergency economic decision. It cannot make €210 billion appear if the courts eventually order repayment.
Nor is it certain that the EU can use the same qualified-majority procedure to obtain unlimited national guarantees or raise whatever new resources would then be required. The authority to assume a liability and the authority to collect the money needed to satisfy it are not necessarily the same.
Europe could therefore discover that it was relatively easy to authorise the spending but politically and constitutionally much harder to finance the consequences.
Investors will understand the message
The EU urgently needs investment. It wants hundreds of billions of euros for defence, energy infrastructure, industrial renewal, digital technology and economic competitiveness. Europe cannot finance all of this from taxation and public borrowing. It requires international capital and continued confidence in euro-denominated assets.
Yet, at precisely this moment, it is debating how to gain control of assets entrusted to Europe’s own financial institutions.
EU officials will say that Russia is an exceptional case. Russia invaded Ukraine, and international law requires an aggressor to pay reparations. They will emphasise the differences between immobilisation, collateralisation and confiscation.
Foreign governments and international investors may reach a simpler conclusion: when political relations deteriorate, assets held in Europe can become political instruments.
They do not have to remove every euro tomorrow. They need only place less of their next investment in Europe. Central banks can increase their holdings of gold, diversify their reserves, use different custodians and conduct more trade through payment systems outside Western control. Each decision may be small. The cumulative effect could be enormous.
Financial trust is built slowly and lost quickly. Once governments begin questioning whether assets held in Europe remain beyond political reach, no regulation from Brussels can order them to forget the precedent.
Spending Europe’s negotiating leverage
The Russian assets are also more than a potential source of money. They are one of Europe’s few substantial bargaining instruments in an eventual peace settlement.
Donald Trump understands their value. His reported 28-point peace proposal treated $100 billion of frozen Russian assets as capital for American-controlled reconstruction projects, with the United States receiving half the profits. Other funds could support future Russian-American ventures.
Washington therefore views the assets not simply as compensation for Ukraine but as negotiable capital.
Using the money now might prevent Washington and Moscow from determining its future without Europe. But it would also eliminate Europe’s own leverage. Once spent, the assets could no longer be exchanged for reparations, security arrangements, sanctions concessions or Russian recognition of a wider settlement. Europe would have consumed one of its few remaining cards to cover another temporary financing shortfall.
And the demands would continue. The €210 billion is finite; the cost of sustaining Ukraine is recurring. Using the assets might postpone the next financial crisis, but it cannot permanently finance the war.
The real cost
Brussels may succeed in constructing an EU institution capable of taking over the Russian accounts. It may distribute the liability so widely that Belgium and Euroclear no longer stand alone. It may even prevail before European courts.
But success within the EU legal system would not restore international confidence. The world would still have watched Brussels redesign its arrangements until it found a mechanism capable of reaching assets whose legal ownership it continued to recognise.
And European taxpayers would be left carrying the risk. If the courts eventually ordered restitution, the same governments that told their citizens the Russian assets would finance Ukraine could be forced to explain why those citizens must now finance Russia’s repayment.
That lesson could last much longer than the money.
Brussels may devise a mechanism allowing a qualified majority to spend Russia’s assets today. It cannot guarantee that a future court will uphold that decision—and it cannot prevent Europe’s taxpayers from receiving the bill tomorrow.
