U.S. dollar banknotes and Russian flag with words “$300 billion frozen assets” are seen in this illustration taken, February 21, 2025. REUTERS/Dado Ruvic/Illustration
Russia Considers Using Frozen Sovereign Assets for Ukraine Reconstruction
Potential Use of Russian Sovereign Funds
Russia has signaled a potential willingness to allow the use of $300 billion in frozen sovereign assets for Ukraine’s reconstruction. However, Moscow would insist that a portion of these funds be allocated to the one-fifth of Ukrainian territory under Russian control, according to three sources familiar with the discussions.
- The proposal emerges amid ongoing negotiations between the United States and Russia regarding a potential end to the Ukraine conflict.
- Russian President Vladimir Putin and U.S. President Donald Trump have both expressed interest in further diplomatic engagements following an initial U.S.-Russia meeting in Saudi Arabia on February 18.
Frozen Assets and Possible Peace Deal
Following Russia’s 2022 invasion of Ukraine, Western nations froze approximately $300-$350 billion in Russian sovereign assets. The majority of these funds are held in European, U.S., and British government bonds within European securities depositories.
While discussions remain in early stages, sources indicate that Russia may propose using a significant portion of the frozen funds for Ukraine’s reconstruction as part of a potential peace settlement.
- Economic Impact: The World Bank estimated in 2023 that Ukraine’s reconstruction and recovery costs would reach $486 billion.
- Western Sanctions: The Group of Seven (G7) nations stated in 2023 that Russia’s sovereign funds would remain frozen until Moscow took responsibility for the destruction in Ukraine.
Trump has expressed interest in allowing Russia’s return to the G7 and has linked U.S. support for Ukraine to American economic benefits, particularly through access to Ukrainian mineral resources.
Russia’s Position and Conditions
While Russia has not officially commented on the matter, some sources suggest that Moscow could accept using up to two-thirds of the frozen funds for reconstruction, provided that accountability measures are in place.
Key Russian conditions may include:
- Recognition of Russian control over occupied Ukrainian territories.
- Partial allocation of funds to Russian-held regions in eastern Ukraine.
- Lifting or easing of Western sanctions on Russian assets.
A Kremlin-affiliated source indicated that Russia might still demand the unfreezing of assets outright as part of a gradual sanctions relief strategy.
Western Reactions and Legal Challenges
The United States and European Union remain divided on how to handle Russian frozen assets. While some Western officials have suggested confiscating the funds to aid Ukraine, legal experts and policymakers warn of potential legal and financial risks.
- European officials, particularly in Germany and the European Central Bank (ECB), have voiced concerns that seizing Russian reserves could set a dangerous precedent and undermine the euro’s stability as a reserve currency.
- Russian officials have argued that seizing sovereign assets violates global financial norms, raising concerns about the security of international banking systems.
- Russia has drafted legislation that would allow it to confiscate funds from Western companies and investors in retaliation, though the bill has yet to be passed by the Russian State Duma.
Implications for Ukraine and Future Negotiations
The use of frozen Russian assets remains a contentious issue in ongoing U.S.-Russia peace discussions.
- Ukraine’s Position: The Ukrainian government insists that any financial agreements must not be decided without Kyiv’s consent and that any settlement should include Western security guarantees.
- European Union’s Stance: The EU emphasized that “nothing about Ukraine and the EU can be decided without Ukraine and the EU.”
While no concrete resolution has been reached, the negotiations highlight a potential shift in Russia’s approach to peace talks. However, any agreement would require broad international consensus, particularly among European nations that hold most of Russia’s frozen assets.
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