EU's Frozen Russian Assets Plan Faces Moscow's Retaliation Threats

The European Union's move to use windfall profits from frozen Russian assets to aid Ukraine sparks Russia's promise of severe retaliation. Russia contends such actions are illegal, undermining global financial stability, and warns of targeting private investors as geopolitics escalate.

The European Union will feel the "full measure" of Russian retaliation over its plan to use income from frozen Russian assets to help Ukraine, Russian Foreign Ministry spokeswoman Maria Zakharova said on Thursday.

EU countries have formally adopted a plan to use windfall profits from Russian central bank assets frozen in the EU for Ukraine's defence, the Belgian government said on Tuesday. Russia says such action is illegal and undermines the foundations of the global financial system.

"We are talking about another attempt to legitimise theft at state level," Zakharova told reporters, saying the EU had shown it could not be considered a reliable jurisdiction for investors. U.S. Treasury Secretary Janet Yellen said on Thursday that immobilised Russian assets represent a potential source of support for Ukraine through 2025 and beyond.

G7 negotiators have been discussing for weeks how to best exploit some $300 billion worth of Russian financial assets, such as major currencies and government bonds, which were frozen shortly after Moscow invaded Ukraine in February 2022. The United States is pushing to find a way to bring forward the future income from those assets, either through issuing a bond or more likely granting Ukraine a loan that it says could provide it with as much as $50 billion in the near term.

Russia has threatened retaliation for weeks, but Moscow's options are limited when it comes to sovereign assets and it is not clear what form any retribution might take. Russia's ability to mete out like-for-like retaliation if Western leaders seize its frozen assets has been eroded by dwindling foreign investment, but it may go after

private investors' cash instead. (Writing by Felix Light and Alexander Marrow; Editing by Mark Trevelyan)