The European plan for Ukraine that could cost it half of its assets in Russia

The idea seems solid. If Russian assets frozen in Europe cannot be legally confiscated, they could at least serve as collateral. With this logic, the European Commission (EC) has pushed a loan plan to Ukraine that, according to the latest public versions, would use up to 165 billion euros in assets of the Central Bank of Russia as a direct guarantee.

And this is where the delicate part begins. Because this not only strains international legality, it also activates an immediate economic risk that smacks of revenge and could leave European companies with a presence in Russia without half of their assets.

The ECB marks the distance and Moscow starts the counter

Until now the model was more cautious. The G7 agreed in 2024 that the interest generated by the retained Russian reserves could go to Ukraine. This is how the ERA (Extraordinary Revenue Acceleration) mechanism was born, with a first package of 50,000 million in loans backed only by returns, without touching capital. The idea was clear. Avoid any movement that could appear to be covert expropriation.

But Brussels has gone further. It’s no longer just about interests. According to several documents leaked to the media, the European plan formally plans to use the assets of the Central Bank of Russia as collateral, mostly sovereign bonds parked in Euroclear, the financial clearing house based in Brussels. And that, for the European Central Bank (ECB), is already too much.

According to the president of the ECB, Christine Lagarde, this legal architecture is a stretch. A forced effort. Not because capital is directly touched, but because a structure is created in which that capital is implicitly compromised. And that opens a new front.

The ECB fears two things. One is legal. The other, reputational. If the euro is perceived as a currency that can be used to move rules when appropriate, loses its status as an international reserve, especially in the BRICS countries (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, United Arab Emirates, Saudi Arabia and Indonesia)

Meanwhile, Russia is preparing to respond and European companies know it. The threats are not new. But this time, Moscow has put a name, figures and calendar. According to sources collected by Reuters and EU Perspectives, the Russian Ministry of Finance has already designed a legal framework to accelerated nationalization of the assets of European companies if the EC plan moves forward. The logic is direct. If you touch our capital, we touch yours.

It’s not a bluff. The value of these European assets in Russia exceeds 200 billion euros, according to estimates by the Russian government. Some companies, such as Auchan, Bayer, Raiffeisen, TotalEnergies, Engie or Pirelli, still operate on Russian territory. Many endure in survival mode. Others are trapped by licenses, local regulations or the legal impossibility of selling.

Since the war began, reported losses from forced divestments in Russia exceed €90 billion, according to Yale CELI calculations. But the biggest blow may be yet to come. Because now we are talking about direct nationalization. Of losing everything. And legally, from the Russian point of view.

The new mechanism would allow Western assets to be auctioned almost immediately. The conditions are already prepared. The legal instrument is approved. Only the signal is missing.

Euroclear and Belgium in the spotlight

The headquarters of the great financial hub is in Brussels. And that makes Belgium the perfect target for future lawsuits. Euroclear manages around €190 billion of frozen Russian sovereign assets. And although the EC tries to distribute responsibilities by including other countries such as Germany, France, Sweden or Ireland, Belgium It remains the structural axis of the system.

For this reason, the Belgian government demands very specific guarantees. He wants to know who pays if Russia doesn’t pay. He wants to know who responds if international lawsuits arrive. He wants to know how far international law can be stretched without the entire European legal system short-circuiting. At the moment, Brussels has no firm answers. And the pressure grows.

The world watches and takes note

Beyond the fight between the EU and Russia, there is another bloc that is doing the math. In countries like India, Brazil, Saudi Arabia or South Africa, this type of movement is analyzed closely. Because if the capital of a central bank can be used as collateral by political decision, then euro reserves are no longer untouchable.

A recent report from the Council on Foreign Relations points to a clear pattern. Every time the West activates financial sanctions of this type, Central banks in other countries and regions recalibrate their reserves. They already did it after the sanctions on the Central Bank of Iran. They repeated it after the blockade of Venezuela. And now the trend is back with Russia.

Gold, the yuan or even smaller currencies such as the Swiss franc or the Australian dollar would gain weight as alternative havens. And that is the systemic risk that the ECB is trying to stop.

However, the final design of the loan remains up in the air. The legal architecture is not yet closed. Belgium remains unsigned. But what was a hypothetical debate has now become a concrete proposal, with explicit support from countries such as Estonia, Ireland or Poland.

At the same time, the G7 scheme continues to operate with more caution. And that makes an important difference. While the United States and the United Kingdom only touch the yields, Brussels tries to convert the frozen capital into active collateral. Even if it does so without changing hands, the message is the same.

The latest figures available at Euractiv confirm that between banking, distribution and energy alone, European exposures in Russia exceed €180 billion. And a good part of these companies have already asked their governments to stop the progress of this plan. But fiscal space is narrowing and aid to Ukraine is urgent.

The ECB insists that there is still room to correct course and Moscow maintains its threat in latent mode. And Brussels is risking not only its relationship with Russia, but also its role as a trusted issuer for the rest of the world.