Windfall Use of Russia's Frozen Assets

Following Russia's full-scale invasion of Ukraine in February 2022, G7 and EU jurisdictions immobilised roughly €260 billion in Russian Central Bank reserves, with the majority — about €190 billion — held at the Belgium-based central securities depository Euroclear. Because these are sovereign assets protected by customary international law on state immunity, outright confiscation has been politically and legally contested. The "windfall use" approach is a compromise: leave the principal frozen but capture the extraordinary profits (interest, coupon payments, and reinvestment income) those assets generate while sanctioned.

The EU formalised this through Council Decision (CFSP) 2024/577 and Council Regulation (EU) 2024/1469, adopted in May 2024, which require central securities depositories holding more than €1 million of immobilised Russian sovereign assets to set aside the net profits. After deducting Euroclear's risk-management retention and corporate tax, approximately 90% of the proceeds are channelled through the European Peace Facility for military support to Ukraine and 10% through the Ukraine Facility for reconstruction and budget support.

At the June 2024 G7 Apulia Summit, leaders went further by agreeing the Extraordinary Revenue Acceleration (ERA) Loans initiative — a roughly $50 billion loan package for Ukraine to be serviced and repaid using the future stream of windfall profits. The US, EU, UK, Canada, and Japan each committed tranches; disbursements began in late 2024.

Key legal arguments supporting the mechanism:

• The profits are generated by the depository, not owned outright by the Russian Central Bank, weakening the immunity claim.
• Use is framed as a countermeasure under the law of state responsibility, responding to Russia's ongoing breach of the UN Charter.
• The principal remains intact and theoretically returnable.

Critics — including the European Central Bank and some EU member states — have warned the mechanism risks undermining the euro's reserve-currency status, inviting reciprocal action against Western assets abroad, and creating precedent for politicised use of clearing infrastructure.