Compensation not for Ukraine. Why confiscated Russian assets may never reach Kyiv

From the first weeks of the Russian Federation’s full – scale aggression against Ukraine, special attention was focused on the assets of Russian oligarchs and companies – yachts and aircraft, real estate, bank accounts, etc. – which were frozen by the governments of our allies.

However, for a long time, these assets remained untouched, and the only case of confiscation – the transfer to Ukraine of 5 million US dollars belonging to Russian oligarch Konstantin Malofeev – was connected to a criminal case initiated long before the full – scale invasion.

The last two weeks, however, have brought progress in the area of private Russian assets.

In particular, Canada announced the intensification of efforts to confiscate a Volga – Dnepr Airlines plane that has been under arrest at Toronto Pearson Airport for several years.

Even more significant was the news that the Belgian central depository, Euroclear, will pay about $3.4 billion to European investors as compensation for losses caused by the blocking and illegal confiscation of their assets in Russia.

However, the latest decision is not without complications.

On the one hand, it is a positive signal; on the other hand, it raises a number of new questions and uncertainties regarding the future of frozen Russian assets.

The West hesitates, Russia confiscates

Unlike Ukraine's Western allies, Russia is acting much more decisively regarding the assets of European investors under its jurisdiction.

Since 2022, the Putin’s regime has systematically restricted the exit of foreign businesses from the country and the sale of their assets. In 2023, a "temporary administration" mechanism was introduced, and discussions are now underway to implement a procedure for full confiscation of such assets.

At the initial stage, Russia even considered the idea of an "asset exchange": Western companies would be allowed to withdraw investments from the Russian Federation by redeeming securities frozen abroad that belong to the Russian state or Russian companies.

However, this initiative did not gain support, and the Kremlin began taking aggressive actions against Western businesses.

Several well – known companies fell under repression: Danone, Carlsberg, and the energy concerns Fortum (Finland) and Uniper (Germany). Their assets in Russia were placed under "temporary administration" by entities linked to the Russian elite, including Chechen leader Ramzan Kadyrov and First Deputy Prime Minister of Russia Denis Manturov.

Subsequently, Danone and Carlsberg were effectively forced to sell their Russian assets at a significant discount.

However, while the EU’s measures were a reaction to Russian military aggression against Ukraine and targeted individuals recognized as being connected to the Russian authorities, Moscow’s actions are openly repressive and justified solely by the fact that the businesses belong to citizens of "unfriendly countries."

The recent EU decision on the potential confiscation of private Russian assets indicates that such behavior by Russia is no longer viewed as acceptable and calls for a clear and asymmetrical response.

EU response

The news that the European Union has decided to use Russian assets to compensate European investors has been one of the main diplomatic sensations of the month.

According to Reuters, Euroclear – the primary global administrator of frozen Russian assets – has decided to seize and redistribute around 3 billion euros, based on authorization granted by the Belgian regulator back in March. The funds will go toward compensating investors who lost assets in Russia as a result of expropriation.

This amount was allocated from a total pool of approximately 10 billion euros in frozen private assets belonging to Russian individuals and legal entities. Previously, these funds were invested or deposited in securities held at Euroclear and, after redemption, held in cash.

The decision was not unexpected: its legal basis was established in the 15th package of EU sanctions against Russia, adopted on December 16, 2024.

Among other things, this document stated that EU central depositories could, in agreement with national regulators, unfreeze Russian assets to meet obligations to clients.

A likely impetus for the EU’s increased action was the decision of the Central Bank of Russia on April 30, 2025: by order of the Arbitration Court of the Kaliningrad Region, approximately 1.9 billion euros were written off from the accounts of the Russian division of Raiffeisenbank in favor of Rasperia Trading Ltd., a company associated with Oleg Deripaska.

This company had attempted to sell its stake in the Austrian construction firm Strabag SE and was negotiating a deal with Raiffeisen Bank International, but the transaction was called off due to pressure from the United States.

It is important to emphasize that this decision applies only to frozen private Russian assets.

In contrast, the reserves of the Central Bank of the Russian Federation – amounting to about 200 billion euros and held in a Belgian bank – remain untouched.

Nevertheless, this step by the EU is unprecedented: until now, the only legal pathway to confiscate private Russian assets was through a court decision in the context of criminal proceedings for tax evasion, support for aggression, or sanctions evasion.

Thus, the administrative decision by EU executive bodies signals a significant shift in approach in this area.

However, for Ukraine, this decision presents both new opportunities and new challenges.

Threat to Ukraine

The decision to confiscate private Russian assets is, to some extent, an icebreaker.

It effectively removes the taboo surrounding the very possibility of confiscation – not only as a tool of pressure on Russia or a source of revenue, but also as a means of full asset recovery.

However, this confiscation was carried out for the benefit of European investors, not Ukraine.

This is a difficult and even alarming signal for the Ukrainian government and civil society, which have spent more than three years advocating for the full confiscation of Russian assets as a foundation for compensation and reconstruction.

Of course, the confiscated 3 billion euros – or even the potential 10 billion euros – is only a small fraction of the losses inflicted on Ukraine or of the 300 billion dollars in frozen reserves of the Central Bank of the Russian Federation.

But the fact that European countries are now prepared to take radical steps primarily to protect their own economic interests is troubling.

Especially considering that this may only be the beginning.

Russia still holds the assets of thousands of European companies, including major banking groups such as Raiffeisen, OTP, and ING. Their potential influence on their respective governments – demanding compensation from frozen Russian assets – could be substantial.

At the same time, frozen private assets will be insufficient, so sooner or later, the issue of confiscating Russian sovereign assets to cover the losses of European businesses will inevitably arise.

That is why Ukraine must seize on this precedent to intensify pressure on the EU – specifically, to demand the transfer of frozen Russian assets to an international compensation mechanism.

This pressure must be clearly justified, above all, by moral and legal arguments:

Compensating victims of aggression is a far more legitimate goal

than reimbursing the losses of companies that knowingly operated in the Russian market.

At the same time, this case can serve as a point of convergence: Ukraine can propose guarantees that a portion of confiscated Russian assets will be used to compensate European businesses for losses they suffered in Ukraine due to Russian aggression.

To achieve this, Ukraine must demand the transfer of all frozen Russian assets to an international compensation mechanism.

However, the key lies in maintaining a clear and consistent position: the primary purpose of confiscating frozen Russian assets must be to compensate for war – related losses.

If the Ukrainian side sends mixed messages – about using the funds for weapons purchases, budget support, reconstruction, etc. – then alternative, less favorable uses may quickly take hold in the broader discourse.

And in that case, the true goal – compensation for the victims – risks being pushed into the background.

Ivan Horodysky,

director of the Dnistryanskyi Center

The material was prepared with the support of the International Renaissance Foundation as part of the project "#Compensation4UA/Compensation for war losses for Ukraine. Phase IV: Addressing Specific Issues to Ensure Compensation.