Guest Post: Maggie McGinnis on “Seizing Russia’s Reserves, Revisited”
Today’s Lawfire® contributor, Ms.Maggie McGinnis follows up on her post from last August (“Seizing Russia’s Reserves, Explained”) to tells us, in her words, “why Europe found a way to fund Ukraine without using Russia’s money—for now.” It is a quite interesting story…with portents for the future. Here’s Maggie:
When I wrote Seizing Russia’s Reserves, Explained in August (published in Lawfire® on August 23), Western governments were actively debating whether frozen Russian sovereign assets could, and should, be used to finance Ukraine’s war effort.
This article revisits that debate, examining what Europe’s most recent attempt to resolve it reveals about international legal constraints, domestic political divisions, and the evolution of EU wartime action.
At its December 18–19 meeting, the European Council (EUCO) agreed to provide Ukraine with a €90 billion loan, approximately $105 billion, for 2026–27. But it did so without seizing Russia’s immobilized central bank assets.
In keeping with Lawfire’s approach, this piece gathers the facts, examines the law, and evaluates the arguments to explain why Europe found a way to fund Ukraine without using Russia’s money—for now.
Europe’s Workaround: Funding Ukraine Without Seizure
The most immediate outcome of the December EUCO meeting is that Ukraine received much-needed financial relief. The $105 billion loan arrives at a critical moment, as Kyiv confronts mounting fiscal pressure while navigating ongoing diplomatic negotiations with Moscow and Washington.
IMF projections show that Ukraine faces severe budgetary pressure, with the total financing gap estimated at over $130 billion for 2026–29; without Western support, it would struggle to finance basic state functions, let alone sustain its war effort. EU leaders framed the outcome as a success because Ukraine will not repay the funds unless Russia pays reparations.
The structure of the loan also matters. Rather than drawing on Russia’s frozen assets—a move that proved politically and legally contentious—the EU chose to raise funds through joint borrowing on capital markets.
By invoking Article 20 of the Treaty on the European Union—a lesser-used mechanism for “enhanced cooperation”—EU lawyers structured the loan so that participation was voluntary rather than unanimous. This allowed Hungary, the Czech Republic, and Slovakia to opt out, while the remaining member states proceeded with financing.
The approach is likely to prove more expensive than asset seizure would have been. Still, it allows funds to flow more quickly and avoids the legal uncertainty surrounding confiscation. At the same time, it leaves untouched one of the largest potential sources of war financing in modern history.
For all the attention it has attracted, the agreement did not resolve the central question that has hovered over Western policy since 2022: whether—and on what terms—Russia’s immobilized sovereign assets should be put to use.
Indefinite Immobilization Rather Than Confiscation
The $105 billion loan to Ukraine has dominated headlines in recent weeks. Less noticed but potentially equally consequential was a parallel decision by EU leaders to indefinitely immobilize Russia’s central bank assets, adopted the week prior. Under existing EU sanctions rules, the freeze on Russian sovereign assets required renewal every six months with the unanimous consent of all 27 member states.
That structure gave frequent holdouts on Russia-related measures—most notably Hungary and, at times, Slovakia—repeated leverage to extract concessions from Brussels, including the implicit threat that failure to renew could force the EU to return the funds to Russia.
On December 12, the European Commission moved to break this cycle by invoking a crisis-era power under Article 122 of the Treaty on the Functioning of the European Union, allowing adoption by qualified majority rather than unanimity.
Article 122 has been used infrequently historically and has typically been reserved for economic difficulties, energy crises, or natural disasters. In recent years, it has increasingly been used to provide energy and finance the defense industry following Russia’s invasion of Ukraine.
The decision to employ Article 122 resulted in a decisive shift: Russia’s immobilized central bank assets—including the roughly $200 billion held in Belgium and approximately $21 billion in France—will now remain frozen until the Commission votes to unfreeze them. The decision is a middle path: an escalation in permanence without an escalation in doctrinal legal risk.
Fear of Russian Retaliation
Concerns about Russian retaliation emerged as a central constraint shaping the EU’s approach. While legal arguments mattered, the hesitation to move from immobilization to confiscation was driven in large part by fear of legal retaliation and asymmetric reprisals by Moscow.
These concerns were not only expressed by frequent skeptics of expanded Russia sanctions, like Hungary, but also by states like Belgium, where an estimated 86 percent of the EU’s immobilized Russian central bank assets are held through the Brussels-based securities depository Euroclear. Belgian Prime Minister Bart De Wever has repeatedly warned that outright seizure would pose “systematic risks to the entire financial world system.”
Given that Italy holds relatively little of Russia’s central bank reserves, the Italian opposition surprised many observers. The explanation likely lies elsewhere. Italian banks—most notably UniCredit—retain nearly $10 billion in Russian territory.
Kremlin threats to confiscate the property of Western firms in response to any seizure of Russian assets may therefore have offered a powerful incentive for caution on the part of Prime Minister Giorgia Meloni.
These fears are not hypothetical. Euroclear has faced Russian lawsuits since the assets were first frozen in 2022, and Russia’s central bank has publicly denounced any confiscation as illegal and reserved the right to use all available means to protect its interests. For Belgium in particular, the prospect of prolonged litigation and retaliatory measures reinforced resistance to confiscation.
As University of Virginia Law professor Paul B. Stephan observed in correspondence with the author, the EU’s reluctance reflects political risk aversion more than legal principle. While the legal case for restraint remains defensible, fear of retaliation “better captures the thinking of EU states,” a reality that, he warned, is discouraging for Ukraine because it reveals the limits of Europe’s willingness to absorb risk on its behalf.
Consensus as the Binding Constraint
Looking forward, the future of Russia’s immobilized assets cannot be understood without confronting the political fragmentation shaping EU policy. Hungarian Prime Minister Viktor Orbán, the most prominent dissenting voice within the EU on Ukraine policy, has argued that he carries a mandate to avoid entangling Hungary in a “joint debt to finance a war” that is not its responsibility.
His stance reflects a broader sovereignty-first framing that rejects both asset seizures and collective borrowing. Hungary has repeatedly blocked proposed EU sanctions on Moscow, obstructed aid to Ukraine, rejected Kyiv’s EU accession, and refused to phase out Russian oil imports.
Orbán has also suggested that Hungary’s position will not remain isolated. He predicts that rising war fatigue and the mounting financial cost of the conflict will shift public opinion elsewhere in Europe. That claim is not entirely unfounded.
According to a December Politico poll, respondents in France and Germany were more reluctant to continue financing Ukraine than respondents in the United States, where skepticism is also spreading as the Trump administration has repeatedly questioned the scale and duration of American assistance.
Taken together, declining enthusiasm among European publics and growing political resistance in the U.S. lend credibility to Orbán’s argument that the coalition backing Ukraine may become harder to sustain.
That said, Hungarian political scientist Zsolt Enyedi cautioned, in correspondence with the author, against assuming that Hungary’s posture is easily transferable across the EU.
Hungary’s centralized power structure and constrained media environment, he argued, make sustained dissent easier to maintain in Budapest than in more pluralistic member states—suggesting that the mechanisms that sustain dissent in Budapest against confiscation may therefore not spread evenly across Europe, even as public fatigue with the war grows.
The December EUCO meeting thus underscored a central tension. Emergency provisions and enhanced cooperation can keep aid moving and assets frozen in the short term, but sustained support for Ukraine ultimately depends on domestic political will.
At this stage, the strongest constraint on the future use of Russian assets is not international law but the erosion of political consensus within Europe.
What Remains Unsettled
On one point, there is broad agreement: the war in Ukraine will require far more than $105 billion. From Orbán to Merz to the scholars consulted for this piece, no one disputes that the EU’s loan is insufficient to meet Ukraine’s long-term financial needs.
EU leaders have been careful to leave the door open. The Council’s conclusions explicitly reserve the Union’s right to make use of Russia’s immobilized central bank assets to repay the loan in the future, signaling that asset seizure remains a live—if deferred—option. In the meantime, successive EU budgets are likely to absorb much of the financial burden.
Concerns that prolonged immobilization could destabilize the international monetary system may be overstated. Professor Stephan noted, “Russia is not China,” and absent a reaction from Beijing, continued immobilization alone is unlikely to pose systemic risk.
The core takeaway is a familiar one. Europe has bought time—for itself and for Ukraine—but it has not resolved the underlying legal and political dilemma. The question of whether, when, and on what terms Russia’s immobilized sovereign assets should be put to use remains unanswered. For now, the reserves stay frozen, the war continues, and the hardest decisions lie ahead.
About the author:
Maggie McGinnis is a Robertson Scholar at the University of North Carolina at Chapel Hill and Duke University, where she is pursuing degrees in political science and sociology with a minor in conflict management. This past summer, she worked as a legislative intern in the United States Senate and as an editorial intern at The Dispatch, where she covered issues of international law and security. At Duke, she serves as Captain of the Duke Moot Court team and volunteers with Legal Aid of North Carolina. A Coca-Cola Scholar, she will graduate in 2027 and plans to attend law school with an interest in international and humanitarian law.
The views expressed by guest authors do not necessarily reflect my views or those of the Center on Law, Ethics and National Security, or Duke University. (See also here).
Remember what we like to say on Lawfire®: gather the facts, examine the law, evaluate the arguments – and then decide for yourself!
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