EU seizure of Russian assets is another act of self-sabotage, by Thomas Fazi

The EU seizure gave added impetus to the de-dollarization movement, and destroyed any residual trust the rest of the world many have had for the U.S. and European governments. From Thomas Fazi at thomasfazi.com:

Beyond prolonging an unwinnable war — with all the destruction and loss of life this entails — such a brazen theft would further erode confidence in Europe’s currency and financial institutions

This is a longer version of an article that originally appeared on UnHerd.

Of all the sanctions deployed against Russia over the past three years, none was as radical or unprecedented as the freezing of Moscow’s foreign-exchange reserves, worth around $300 billion — about half of its overall reserves. Washington had previously frozen the assets of weaker adversaries such as Afghanistan, Iran, Syria, and Venezuela. But none of these countries remotely matched Russia’s stature: a G20 economy and the world’s largest nuclear power. Nor had any of the 63 central banks belonging to the Bank for International Settlements (BIS) in Basel — often described as the “central bank of central banks” — ever been subjected to such measures, not even during the Second World War.

The freeze upended what had long been considered a sacred principle of international finance: the neutrality of central bank reserves. It was also clearly illegal. Under customary international law, sovereign assets held abroad enjoy immunity from confiscation. This protection is affirmed in various treaties, including the 2004 UN Convention on Jurisdictional Immunities of States (though not universally ratified). By stripping Russia of access to its reserves, the West crossed into what could be described as outright theft — an act of international financial gangsterism that flouts both domestic and international property protections.

The message was unmistakable: from now on, Washington and its allies were prepared to weaponise the very foundation of the international financial system. As Wolfgang Münchau observed at the time, this was “the biggest gamble in the history of economic warfare”, one that in a single stroke undermined global trust not only in the US dollar but also in the Western-led financial order as a whole. For countries outside the West, above all China — which holds over a trillion dollars in US assets — the need to accelerate “de-dollarisation” suddenly acquired existential urgency. Indeed, it is broadly acknowledged that freezing Russia’s reserves gave powerful momentum to the de-dollarisation drive that has accelerated since 2022.

One might have thought that the shockwaves of this move would have taught Western governments some caution. Instead, Brussels is now preparing to double down. Until now, Russia’s reserves have remained frozen but untouched. But pressure is building inside the EU to go further — to actually use these funds. Roughly €200 billion of the immobilised assets are held at Euroclear, the Brussels-based clearing house. German chancellor Friedrich Merz has recently called on the EU to seize these reserves and channel them into Ukraine’s war effort. His proposal, unveiled in the Financial Times, envisions using the assets to unlock a €140 billion loan for Kyiv.

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