The Frozen Assets Gambit: How Seizing Russian Funds Could Tip the Scales in Ukraine’s Favour
Could seizing Russia’s frozen assets be the key to Ukraine’s victory? As Putin rebuffs peace deals and Syria’s upheaval reverberates, how will these factors reshape the war’s trajectory?
As the war in Ukraine grinds on, Western powers are increasingly looking to unconventional measures to support Kyiv’s defence efforts and reconstruction needs. One of the most controversial yet potentially game-changing proposals involves the seizure and repurposing of frozen Russian assets. This bold move, coupled with recent geopolitical shifts in the Middle East, could reshape the conflict’s trajectory and Ukraine’s prospects for victory.
The Economic Weapon: Turning Russian Assets into Ukrainian Aid
The West’s decision to freeze over $300 billion of Russian sovereign assets in the wake of the invasion was a significant economic blow to Moscow. Now, there’s growing momentum to take this a step further by confiscating these funds outright and channelling them to Ukraine’s war effort and eventual reconstruction.
The economic case for such action is compelling. Ukraine’s financial needs are staggering, with reconstruction costs alone estimated at nearly $500 billion. Western taxpayers have already shouldered a considerable burden, with bilateral support to Ukraine reaching $278 billion as of January 2024. The seized Russian assets could make a substantial dent in these figures, potentially alleviating the strain on Western economies while simultaneously increasing support for Ukraine.
This approach sends a powerful message about the consequences of military aggression. By definitively stripping Russia of these assets, the West would be imposing a tangible, long-term cost for Putin’s war of choice. This could serve as a deterrent to other nations contemplating similar actions, reinforcing the global rules-based order.
From Freeze to Seizure: The EU’s Pioneering Approach
The European Union has taken the lead in operationalising this strategy. In a groundbreaking move, the EU has begun transferring proceeds from immobilised Russian assets to support Ukraine. The first instalment, a substantial €1.5 billion, was made available in July 2024. This innovative approach channels the extraordinary revenues generated by EU operators holding these frozen assets through the European Peace Facility and the Ukraine Facility.
The mechanism is designed to support both Ukraine’s immediate military needs and its long-term reconstruction efforts. Of the initial €1.5 billion transfer, a significant €1.4 billion has been allocated to the European Peace Facility, earmarked for critical military equipment including air defence systems and artillery ammunition. Importantly, this funding will also support procurement from Ukraine’s own defence industry, bolstering the country’s self-reliance and economic resilience.
This approach is not without precedent. The EU has already adopted legal acts enabling the use of net profits from these frozen assets for Ukraine’s benefit. The move represents a creative solution to the challenge of sustaining support for Ukraine in the face of potential donor fatigue and competing global crises.
The Broader Economic Strategy
The EU’s asset seizure initiative is part of a larger economic strategy to support Ukraine. In October 2024, the EU approved a novel €35 billion loan to Ukraine, to be repaid through interest generated on frozen Russian assets. This approach aims to provide Ukraine with urgent funding for infrastructure and defence needs without placing an additional burden on EU member states’ budgets.
These financial manoeuvres serve a dual purpose. They not only provide Ukraine with much-needed resources but also increase the economic pressure on Russia. By depriving Moscow of access to these funds and redirecting their benefits to Ukraine, the West is effectively turning Russia’s own financial strength against it.
Putin’s Intransigence: Why a Trump Peace Deal is Unlikely
While the asset seizure strategy could significantly bolster Ukraine’s position, the prospect of a swift negotiated settlement remains dim. This is particularly true when considering the potential for a Donald Trump-brokered peace deal, should he return to the White House.
Despite Trump’s campaign pledges to swiftly end the conflict, recent insights from Kremlin insiders suggest that Putin is unlikely to accept any deal that doesn’t meet Moscow’s expansive demands. Konstantin Malofeyev, a Western-sanctioned Russian tycoon and Putin confidant, has indicated that there’s only a “50–50” chance of an eventual agreement with Trump.
Putin’s demands, as relayed by Malofeyev, are far-reaching and likely unacceptable to both Ukraine and the West. They include:
- Legally binding neutral status for Kyiv
- Reversal of Washington’s approval for Ukraine to use its missiles within Russian territory
- Removal of Ukrainian President Volodymyr Zelensky from office
- Addressing Russia’s broader security concerns in Europe and globally
Furthermore, Putin is seeking a “long-term peace” that would involve discussions on wars in the Middle East, Russia’s alliance with China, and a U.S. acknowledgment that Ukraine is part of the Kremlin’s “core interests”. These demands go far beyond the scope of the Ukraine conflict, effectively calling for a renegotiation of the global order.
The Kremlin’s stance reflects a fundamental misalignment with Western objectives and Ukrainian sovereignty. Putin’s insistence on Ukraine ceding swaths of territory across its east and south as a precondition for peace talks is a non-starter for Kyiv. President Zelensky has consistently maintained that Ukraine requires security guarantees from NATO and additional weaponry before engaging in any negotiations with Russia.
This hardline position from Moscow suggests that even if Trump were to pursue an aggressive peace initiative, it would likely fall on deaf ears in the Kremlin. Putin appears to be playing a long game, betting on Western resolve weakening over time rather than making significant concessions in the near term.
The Assad Factor: Implications of Syria’s Upheaval
The recent and unexpected collapse of Bashar al-Assad’s regime in Syria has sent shockwaves through the geopolitical landscape, with potential ramifications for the Ukraine conflict. While some analysts initially speculated that this development might weaken Russia’s position and potentially make it more amenable to negotiations in Ukraine, the reality may be more complex.
Assad’s downfall represents a significant loss for Russia in terms of regional influence and strategic positioning. The Syrian dictator was a key ally in the Middle East, and Russia had invested considerable resources in propping up his regime. The loss of military bases in Syria, particularly the naval facility at Tartus, deals a blow to Russia’s power projection capabilities in the Mediterranean and beyond.
However, rather than making Putin more conciliatory, this setback may actually harden his resolve in Ukraine. Tatiana Stanovaya of the Carnegie Russia Eurasia Center suggests that “Assad’s collapse has also shaken Putin, making him less inclined to demonstrate flexibility with Ukraine”. The fear of appearing weak on multiple fronts could drive Putin to take an even more uncompromising stance in any potential negotiations.
The Syrian situation may serve as a cautionary tale for Putin about the risks of showing any sign of weakness or willingness to compromise. The rapid collapse of a regime that Russia had invested so heavily in protecting could reinforce Putin’s determination to maintain a maximalist position in Ukraine, fearing that any concession could lead to a similar unravelling of Russian interests.
Prolonging the Conflict: A War of Attrition
The combination of these factors — the potential seizure of Russian assets, Putin’s intransigence, and the geopolitical fallout from Syria — may ultimately contribute to prolonging the war in Ukraine rather than hastening its resolution.
The asset seizure strategy, while providing crucial support to Ukraine, also raises the stakes for Russia. Putin may view this as an escalation, making him less likely to engage in meaningful negotiations. Instead, he may double down on his military efforts, hoping to achieve his objectives through force rather than diplomacy.
The failure of potential peace initiatives, whether from Trump or other international actors, due to Putin’s expansive demands, leaves little room for diplomatic breakthroughs. This stalemate could lead to a protracted conflict, with both sides digging in for a long-term struggle.
The Syrian example may reinforce Putin’s belief in the necessity of maintaining a strong military presence in Ukraine, fearing that any withdrawal or compromise could lead to a rapid collapse of Russian-backed positions, as seen in Damascus.
Conclusion: A Complex Path Forward
The strategy of using frozen Russian assets to support Ukraine represents a bold and potentially transformative approach to the conflict. It provides Ukraine with much-needed resources and imposes real costs on Russia for its aggression. However, this economic pressure alone is unlikely to bring about a swift resolution to the war.
Putin’s apparent unwillingness to accept any peace deal that doesn’t meet his expansive demands, coupled with the geopolitical aftershocks of Assad’s fall in Syria, suggests that the conflict may be entering a new, potentially prolonged phase. The West’s challenge will be to maintain its resolve and support for Ukraine in what could become a war of attrition.
As the situation evolves, the international community must remain flexible and creative in its approach. The asset seizure strategy is a prime example of such innovation. However, it must be complemented by continued diplomatic efforts, military support for Ukraine, and a united front against Russian aggression.
The path to peace in Ukraine remains fraught with challenges, but by leveraging economic tools, maintaining diplomatic pressure, and learning from geopolitical shifts elsewhere, the West can continue to support Ukraine’s sovereignty and territorial integrity. The war’s ultimate resolution may be distant, but every step taken to bolster Ukraine’s position brings it closer to a just and lasting peace.
Sources: 1, 2, 3, 4, 5, 6, 7, 8 & 9
Bob Lynn / 13-Dec-2024
