Just days after Russia launched its full-scale invasion of Ukraine in February 2022, the US administration worked with G7 countries to freeze some $300 billion in Russian assets kept in various holdings from foreign currencies to government bonds.
After Russia had invaded Crimea in 2014, Moscow had moved most of its overseas assets out of the US and into Europe, assuming it would be safer there.
For that reason, the bulk of Russia's assets - some €194 billion - have remained frozen in Euroclear, a Belgium-based central securities depository.
EU member states, and Belgium in particular, have been reluctant to seize those assets and use them to help Ukraine. The arguments have been that there is sovereign immunity, underpinned by international law, to protect a country's overseas assets.
The ECB also expressed concern that seizing the assets would undermine the euro’s credibility and discourage third country central banks from holding euro-denominated assets.
Counter arguments have suggested that states can carry out measures that would otherwise be illegal against a state that has violated the fundamental rules of international law.
The Kyiv School of Economics has also argued that the euro's share in global reserves has remained stable at 20%, broadly unchanged since the start of Russia's full-scale invasion.
The Russian assets have generated profits (interest) and some of that has been used. In October 2024, G7 countries agreed on a €45bn loan to Ukraine which would be repaid by future profits generated by the assets.
However, the amount of accruing interest is falling, and, as the war has dragged on, there is more pressure on the EU to finally start putting the frozen assets to greater use.
In December last year, the UN, World Bank, Ukraine and the European Commission jointly estimated that the cost of rebuilding Ukraine amounted to $524 billion.
The other pressure is coming from the United States.
Congress has already passed the REPO act which allows the US to seize Russian assets in order to pay for the rebuilding of Ukraine (only €4.3 billion in Russian Central Bank assets are thought to reside in the US).
President Trump has signalled that he is going to taper off US funding for Ukraine’s defence - the US will still provide the weapons, but only if the EU pays for them.
EU officials acknowledge this will mean a significant funding gap for Ukraine’s defence.
Given the debate over the country’s security guarantees, the mainstream view among EU capitals is that Ukraine itself is the first line of defence for Europe, and that it needs funding to ensure that continues, particularly in scaling up drone manufacturing.
The recent drone incursions in Denmark, and the Russian fighter jet intrusions into Estonian airspace, have led planners to believe the Russian threat is now concrete rather than abstract.
The Russian assets are now back in the spotlight.
The European Commission has proposed using the assets to fund a new €140bn loan for Kyiv.
Under the proposal, Ukraine would only have to pay the loan back once Russia starts paying reparations after the war.
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In that sense, the assets would not be "seized". The approach would require other member states to underwrite the arrangement, and that has drawn contrasting degrees of enthusiasm from national capitals. France, in particular, does not want any guarantee to complicate its already perilous balance sheet.
Belgium, which hosts Euroclear, is also adamant that any risk must be shared.
In an important shift, German Chancellor Friedrich Merz last week signalled he would support such a loan.
The mechanism could be created and underpinned by a "coalition of the willing" rather than all 27 EU governments, as a way of sidestepping any potential veto by Hungary.
While today’s summit in Copenhagen is an informal one - meaning no formal decisions can be adopted - officials hope the huddle will provide a glidepath for a decision at the formal EU summit in Brussels later in October.
"There needs to be political guidance on whether they are ready to work on this in order to use the immobilised assets for the financing of Ukraine," says a senior EU official.
