Europe’s Plan C: unlocking frozen Russian assets to fund Ukraine

On July 9, 2025, the European Court of Human Rights held Russia responsible for human rights violations in eastern Ukraine and for downing flight MH17, killing all 298 aboard in 2014. While compensation amounts are pending, these judgments created enforceable claims for Ukraine and the Netherlands, forming the legal foundation for the approach outlined below as Plan C.

A swing and a miss. That pretty well describes the meeting of the leaders of the European Union on December 18-19, 2025. They were asked at that meeting to approve a Reparations Loan proposal crafted by the European Commission that would have removed a significant portion of the €185bn of immobilised Russian assets from Euroclear, the Belgium-based securities clearing system. Those monies were to be replaced on Euroclear’s books by an EU debt instrument.

The plan – Plan A – was for the EU to lend the liberated funds to Ukraine in the form of a limited recourse loan; that is, a loan repayable only if, as and when Russia pays reparations for the damages caused by its illegal invasion of Ukraine. Plan A misfired. Belgium demanded extensive guarantees and indemnities against any liability that it or Euroclear might incur as a consequence of its complicity with Plan A. Other member states then choked on the extent and complexity of the indemnities Belgium was seeking. The result was approval of a Plan B. The EU would lend Ukraine €90bn from the EU budget, an amount sufficient to cover Ukraine’s anticipated budget shortfalls for about two years. While that €90bn is certainly useful – indeed essential – to keep Ukraine in the fight over the near term, it is an inferior outcome for several reasons:

• A key objective of liberating the immobilised Russian assets is to demonstrate that Ukraine has the financial resources to continue its resistance to Russia’s aggression for a sustained period, even in the absence of American support, without relying on the generosity of hard-pressed European taxpayers. If Putin assumed that Ukraine will run out of money before the Russian economy cracks under the strain of sanctions and war-related expenditures, the objective of Plan A was to disabuse him of that belief and thus motivate him to seek a reasonable settlement of the conflict. €90bn is a lot of money, but it may not be enough to puncture Putin’s assumption that he will eventually win a war of attrition.
• The immobilised assets continue to sit – high, wide and handsome – in a Euroclear account in the name of the Central Bank of Russia. They are therefore still perilously in play. And as revealed by the 28 Points, Trump has already cast his covetous eye on those funds. Putin has even proposed using $1bn of frozen money to pay for a permanent seat on Trump’s Board of Peace. The one indelibly obscene outcome of this affair would see Russia both recovering its frozen assets and being absolved of any obligation to pay reparations for its invasion of Ukraine. Putin will surely insist on that position when the peace talks begin in earnest and, if the 28 Points have any premonitory value, Trump may well endorse that outcome or something very much like it.
• Even if the €90bn is raised from the capital markets through some form of EU common borrowing, that liability will still rest on the narrow and beleaguered shoulders of European taxpayers. The budgets of many EU member states are already audibly groaning. While European support for Ukraine remains strong today, that enthusiasm may fade as domestic budgetary pressures in the donor countries begin to bite even deeper.

Plan C

In the middle of 2025, a new piece was added to the chessboard for resolving this problem. On 9 July 2025, the European Court of Human Rights (ECHR) announced its judgment in a case brought against Russia by Ukraine and the Netherlands. Ukraine sought damages for egregious human rights violations that occurred in eastern Ukraine beginning in 2014 with the arrival of pro-Russia armed groups. For its part, the Netherlands sought damages for the downing of flight MH17 on 17 July, 2014. All 298 civilians aboard that airplane were killed, including 196 Dutch nationals. The ECHR had previously (in 2024) handed down a judgment against Russia for human rights violations during its annexation of Crimea. The ECHR found that it had jurisdiction over Russia because Russia was a party to the European Convention on Human Rights until it withdrew on 16 September, 2022. The Court therefore accepted 16 September, 2022 as the cutoff date for claims under these proceedings.

In a unanimous decision, the ECHR held Russia liable to Ukraine for widespread and flagrant abuses of human rights and liable to the Netherlands for the shooting down of flight MH17. In both situations, however, the Court deferred its decision on the precise amount of monetary damages pending further investigation. These final ECHR judgments against Russia present an opportunity for a much simpler transaction involving the immobilised assets. Such a transaction – Plan C – would have these elements:

1. Pursuant to an EU resolution, the immobilised assets (now mostly cash) would be moved to a new custodian located outside of Belgium. That custodian could be an existing EU organ like the European Investment Bank, or perhaps a national central bank or a newly created special purpose vehicle. Russia and the Central Bank of Russia (CBR) would continue to be the legal owners of those funds while in the possession of the new custodian.

2. The new custodian will need to invest the cash in something and, by virtue of existing EU law, the owners of the cash (Russia and CBR) can have no say in the choice of that investment. All potential investments, even overnight deposits at the European Central Bank, however, carry some tincture of financial risk for the owner of the funds. All potential investments, that is, except one.

3. The sole investment that the custodian could now make with Russia’s cash that entails no – zero – financial risk for Russia would be to use those funds to purchase from Ukraine and from the Netherlands their entitlements to compensation under the judgments of the European Court of Human Rights referred to above. (This purchase would cover entitlements up to the amount of the purchase price. If the final ECHR awards are greater than the purchase price paid by the custodian, Ukraine and the Netherlands would retain their claims for any excess amount.) As a matter of law, these entitlements cannot now be doubted even though the precise amount of the awards must await further investigation by the Court. Following this purchase, Russia will thus effectively own (through the custodian) a claim against Russia, a position that eliminates any possibility of a financial loss for Russia. If Russia pays the ECHR judgments when final awards are made, that money will, dollar for dollar, replenish the cash account the custodian holds for Russia. But if Russia defaults in paying the ECHR judgments, it will simultaneously (i) save the money it owed under the judgments but (ii) lose a precisely equivalent amount of money under those judgments. A perfect wash. No other investment that the custodian could make with Russia’s money could provide that degree of certainty. (Once claims against Russia for other damages resulting from the invasion of Ukraine are determined, of course, those reparations could also be purchased by the custodian with no financial risk to Russia.)

4. If Plan C were used, prior to the ECHR rendering specific monetary awards, to displace some of the €90bn that has been committed by 24 of the 27 European member states under Plan B, the custodian and the judgment creditors (Ukraine and the Netherlands) will need to settle on an appropriate purchase price for the entitlements (because the ECHR has not handed down final monetary awards). In the case of the Netherlands, the Dutch Government could commit to return to the custodian any amount by which the final amount awarded for damages for the downing of flight MH17 is less than the purchase price paid by the custodian for that claim. Ukraine could commit to cover any comparable shortfall in respect of the entitlement it sells to the custodian by pledging its separate entitlement to damages for Russia’s actions after September 16, 2022 (the cutoff date for the 2024 and 2025 ECHR judgments). A treaty establishing an international claims commission (under the auspices of the Council of Europe) covering these additional damages was signed at the end of 2025.

The removal of the immobilised assets from Euroclear and Belgium should calm Belgium’s anxieties about its legal exposure. That removal would be taken in response to a resolution of EU law, in the same way that Euroclear and Belgium froze the accounts in 2022 as a result of a similar EU resolution. Were that action to become the subject of a legal challenge by Russia in a European court or in an arbitration, Belgium would enjoy the strongest of all defences — legal compulsion.

Investing Russia’s money in a Russian obligation (the adjudicated liabilities that are the subject of the ECHR judgments) cannot be characterised as a confiscation of those funds. At most, this structure would effectively preclude Russia from dishonouring final and unanimous judgments of the European Court of Human Rights, a result that Europe should embrace.

Tactical implications

The €90bn of financing contemplated by Plan B has now been committed; it should tide Ukraine over for up to two years. Plan C – the purchase, using Russia’s immobilised assets, of Ukraine and Dutch entitlements under outstanding ECHR judgments – can thus be deployed in one of two ways. One option would be to use Plan C to displace some of that €90bn commitment. The second would be to deploy Plan C as a supplement to the €90bn, to be used during the next two years if the €90bn runs out but, in any event, to stand as dry powder for any additional budgetary support Ukraine may need in the future. That should give Ukraine and its European allies a sufficiently large bazooka to puncture Putin’s assumption that he will outlast the tolerance and generosity of European taxpayers.

But whatever decision is made about the tactical deployment of Plan C, moving the immobilised cash out of Euroclear and Belgium is a step that should be taken immediately. Belgium has made a poignant case for the risks that it feels it bears as the current custodian of the immobilised Russian assets. It is only fair, and perhaps merciful, now to relieve Belgium of those anxieties.

The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.