Economic dimensions
What are the economic risks of transferring frozen Russian assets?
Critics raise five main economic objections. Here is what the evidence shows about each one.
Analysis drawn from: Hilgenstock, Risinger, Vlasyuk, and Ribakova, "Implications of the Confiscation of Russian Sovereign Assets" (KSE Institute, April 2025)
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01
Will it weaken the dollar or euro?
The worry: other countries will stop holding dollars and euros as reserve assets if G7 governments seize Russian funds.
We already have data on this. Russia's $300B+ in assets was frozen in February 2022. From a reserve manager's perspective, frozen and seized have the same practical effect: the money is inaccessible. So we can look at what actually happened to global reserve holdings since then.
Before (Q2 2021)
94.1%
Share of global reserves held in G7+ currencies
After (2024)
93.7%
Share of global reserves held in G7+ currencies
Absolute growth
+66%
Growth in G7+ currency reserves in absolute terms since the freeze
Countries hold currencies based on who they trade with and what assets are available, not as a political statement. Even Russia itself tried to diversify away from Western currencies after 2014, and still ended up with half its reserves in G7 jurisdictions in 2022, because the alternatives simply don't work at scale.
Bottom line
No meaningful shift has occurred since the freeze. The structural barriers to replacing G7 currencies as reserve assets remain high.
02
Will it raise European borrowing costs?
The worry: foreign investors will sell European government bonds in protest, driving up interest rates on government debt.
This risk is real but routinely overstated. Critics often apply a hypothetical rate increase to all outstanding government debt. In practice, higher rates only affect debt that is refinanced during the period, which is a much smaller pool. And there is a major countervailing factor that is usually left out.
The cost
$37.3B
Estimated additional debt costs from a temporary 0.5% yield increase across confiscating G7 countries (excluding the US)
The offset
~€230B
European borrowing that would become unnecessary if RSA were used instead of new debt issuance to fund Ukraine
Europe has to fund Ukraine's defense and reconstruction one way or another. Using Russian assets means borrowing less, and that reduction could push yields down, potentially offsetting any negative market reaction. The ECB also has specific tools, including the Transmission Protection Instrument, designed to counter politically motivated attacks on member-state debt.
Bottom line
Some yield increase is possible, particularly for Belgium and France. However, the real comparison is not between action and a free ride — it is between using Russian assets and borrowing the same money from markets instead.
03
Will Russia seize Western companies' assets in retaliation?
The worry: Russia will expropriate the factories, offices, and investments of Western businesses still operating in Russia.
This is already happening. Russia has been seizing Western assets since the early days of the 2022 invasion — Fortum, Uniper, Danone, Carlsberg, Bosch, and others — under domestic legislation that operates independently of what the West decides about CBR reserves.
Already lost
$167B+
Direct losses incurred by foreign companies since 2022 through write-offs and seizures (KSE Institute)
Still at risk
$131B
Assets of G7-country firms still in Russia — much of it illiquid (factories, not cash)
The pattern
Inverse
Russia's most aggressive expropriations followed Western statements ruling out asset seizure — not seizure itself
Large-scale expropriation also works against Russia's own long-term interests. Once the war ends, Russia will need foreign investment to rebuild. Indiscriminate seizure of Western assets would deter investors for years — a cost the Kremlin has signaled it wants to avoid.
Bottom line
Russian retaliation is driven by Russian policy, not Western decisions about CBR reserves. It is already underway and would likely continue regardless.
04
Are the assets more valuable as a negotiating chip?
The worry: keeping assets frozen gives Ukraine and its partners leverage in peace talks, but transferring them prematurely removes that leverage.
The leverage does not disappear with a transfer. Russia owes Ukraine far more in reparations than the total value of the frozen assets. Any amount transferred would be credited against that debt — the leverage shifts form rather than disappearing.
Ukraine's documented losses
$588B+
Reconstruction cost estimate (2025), which already exceeds total frozen RSA, meaning Russia's debt is larger than the assets
Four years of immobilization
No deal
Multiple rounds of negotiation have not produced a ceasefire, despite assets remaining frozen as nominal leverage
International law also requires that countermeasures be reversible where possible. Transferred assets could in principle be credited against Russia's reparations obligation, so even in a future settlement, the money remains part of the accounting. What changes is that Ukraine gets resources now rather than waiting for an uncertain future settlement.
Bottom line
The bargaining-chip argument assumes a leverage that has not materialized in four years. Transfer converts the leverage rather than eliminating it.
05
Does it set a dangerous precedent?
The worry: seizing a country's central bank reserves could be used as a template by future governments in less justified circumstances.
Inaction also sets a precedent. Not acting sends a signal too: that a country can invade a neighbor, commit documented war crimes, and eventually get its reserves back because Western governments hesitated.
Precedent of action
Aggression carries material consequences
States that violate fundamental rules of international law face real costs — not just condemnation.
Precedent of inaction
Aggression can be financially absorbed
Aggressors can wait out political hesitation and eventually recover frozen assets with no lasting penalty.
The circumstances here are not easily replicable: Russia's invasion has been condemned by 141 UN member states, documented by multiple international bodies, and is subject to ICC prosecution. A transfer conducted through the International Claims Commission — a formal multilateral mechanism — is a different kind of act than unilateral confiscation. The Iraq precedent (1991–92) shows this can be done without lasting damage to reserve currency confidence.
Bottom line
The precedent concern applies with equal weight in both directions. A legally grounded, multilaterally coordinated transfer substantially limits the precedential scope.