It was always likely that the fate of Russia’s $300 billion in frozen central bank reserves would be a key issue in negotiations over Ukraine’s future. With a new White House administration initiating fresh diplomatic efforts, those assets have now become potential bargaining chips in the broader push for a settlement.
While the details of the negotiating process that recently began in Riyadh remain opaque, reports are already circulating of various potential formulas for using the funds. According to insiders, one proposal would involve allocating part of the reserves to support the reconstruction of the roughly one-fifth of Ukrainian territory currently occupied by Russian troops. In practice, this would mean returning the frozen assets to Russia.
Kyiv would vigorously oppose any such move, which would be seen as contrary to both Ukraine’s national interests and the interests of the victims of Russian aggression. This underscores the high stakes involved as the talks progress and the opposing sides debate the fate of Russia’s frozen assets.
Since February 24, 2022, the Russian Central Bank reserves represent the largest frozen pool of Russian sovereign assets. Kyiv has consistently called for their full release to finance Ukraine’s war effort and compensate for the war damage inflicted by Russia. The G7 countries have repeatedly reiterated their position that the frozen assets will remain immobilized until Russia pays for the damage it has inflicted on Ukraine.
This position effectively placed the onus on Ukraine and Russia to negotiate a political settlement, including war reparations. Over the past three years, considerable work has been done to develop legal grounds for the confiscation of frozen Russian assets in favor of Ukraine, but no decisive action has been taken to seize them directly.
Instead, as a stopgap measure, Ukraine received interest accrued on the funds, which were deposited in 2024. In addition, the G7 leaders agreed to provide a $50 billion loan, to be repaid in the coming years using frozen reserves. The agreement represents a significant achievement. It also raised speculation that the Russian assets will remain intact until the loan is fully repaid, which could take 10 to 15 years.
The start of U.S.-led peace talks in Saudi Arabia has changed the political calculus around the use of frozen Russian funds. Potential proposals to use them for the reconstruction of Ukraine, including reconstruction projects in Russian-occupied territories, would mark a dramatic departure from previous policy. While this would undoubtedly be presented as a pragmatic step toward resolving the conflict, many would see it as a major concession to Moscow.
At first glance, this approach may appear to be aimed at striking a balance between competing interests. In reality, it risks undermining the very principles on which the international response to Russian aggression was built.
Since 2022, there has been a broad consensus that Russia, as an aggressor state, bears full responsibility for the consequences of the war, including an obligation to compensate for all damages, regardless of the circumstances in which they were inflicted. This was reaffirmed in a UN General Assembly resolution, which is one of Ukraine’s key diplomatic achievements at the United Nations.
Any compromise that would allow Russia access to its frozen reserves, even indirectly, would set a dangerous precedent for sharing responsibility for war-related damage. While some might argue that the money ultimately belongs to Russia and that partial access would not represent a strategic loss for Ukraine, this view ignores a fundamental reality: these frozen assets were intended to serve as leverage to force Russia to accept its legal obligations, including reparations. Allowing Moscow to regain control of even a portion of the frozen assets would weaken that leverage and allow the aggressor to benefit at the expense of its victims.
The fundamental problem remains clear. Any model for releasing Russian sovereign assets must prioritize justice for Ukraine and the victims of Russian aggression. Releasing these funds for use by the aggressor state without a formal reparations agreement would be contrary to the principles of accountability.
Since May 2022, Ukraine has consistently advocated for the creation of an international compensation mechanism based on the vision that the victims of aggression should be the main beneficiaries. The fate of Russia’s frozen $300 billion has always been at the center of this process, as these funds were considered the main source of funding for reparations. Within a framework led by the Council of Europe and supported by a coalition of international partners, including the United States, a compensation fund could serve as the main instrument for distributing these assets to those who suffered directly from Russia’s aggression.
While the mechanism requires further refinement, proponents believe that this format is the best way to ensure meaningful reparations. The recently established Registry of Damages for Ukraine, tasked with registering all eligible claims for payment through the Compensation Fund, is a first step in this direction, demonstrating a tangible commitment to prioritizing compensation for victims.
Transferring Russia’s frozen reserves to a future Compensation Fund appears to be the most logical and legally sound course of action. Moreover, the European Union, which manages $210 billion of the Russian Central Bank’s $300 billion in frozen reserves, reportedly supports the move. Without this asset transfer, the whole idea of a reparations mechanism for Ukraine would be undermined.
While the operational details of any future solutions may be clarified in multilateral negotiations involving Ukraine and the EU, the guiding principles appear clear. They should include the use of frozen Russian assets to serve the interests of Ukraine as a victim of aggression. The primary purpose of these funds should be direct compensation for war damage suffered by Ukrainian citizens, businesses and institutions. Meanwhile, any decision to use them should be based on principles of fairness, ensuring that responsibility for war-related damage is not shifted to Ukraine and that a victim-centred approach remains at the heart of the process.
Ivan Gorodisky is a nonresident senior fellow at the Atlantic Council's Strategic Litigation Project and director of the Dniester Center for Policy and Law.
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