Since the outbreak of the War on Ukraine, Western countries have swiftly imposed a series of sanctions on Russia, with financial sanctions being the most severe.
These financial sanctions include freezing the overseas assets of Russian oligarchs and enterprises, and notably disconnecting Russia from the SWIFT system, which effectively downgrades all Russian commercial banks to the level of local credit cooperatives. The EU has also compiled a list of 1473 individuals and 206 entities whose funds and economic resources (such as real estate) have been frozen. However, there are still challenges in identifying these assets. EU member states also froze the assets of the Central Bank of the Russian Federation (CBR) and prohibited any EU operators from engaging in financial transactions with this entity. Nevertheless, what the long-term impact of these asset freezes?
The key challenge lies in the fact that the CBR’s reserves enjoy the protetion by international customary law, and the confiscation requires the establishment of legal instruments at the international level. In November 2022, motivated by the principle that "Russia must pay for the devastation of Ukraine," the European Commission proposed utilizing Russian assets for reconstruction purposes. The European Commission has recommended designating certain Russian entities as criminal or terrorist organizations in order to seize their assets.
Pertinently, the CBR reserves are intricately linked to the conclusion of a peace agreement between Russia and Ukraine, as well as the subsequent lifting of sanctions. The aforementioned peace agreement should encompass issues such as war reparations and the transfer of funds to Ukraine. However, in light of Russia's overarching policy objective of complete conquest of Ukraine, coupled with its persistent non-compliance with the Minsk agreements, the EU may be compelled to modify the relevant international norms (without necessarily awaiting the conclusion of a peace agreement) and confiscate CBR reserves through international agreements in order to secure adequate funding for reconstruction efforts.