Russia is open to the possibility of utilizing $300 billion in frozen sovereign assets held in Europe to aid in Ukraine’s reconstruction, but it would demand that a portion of the funds be allocated to the regions currently under its control, according to three sources cited by Reuters.

On February 18, Russia and the United States engaged in their first direct talks about ending the Ukraine war during a meeting in Saudi Arabia. Both U.S. President Donald Trump and Russian President Vladimir Putin have expressed interest in an upcoming face-to-face discussion.

Following Russia’s invasion of Ukraine in 2022, the U.S. and its allies imposed financial restrictions, blocking Russian central bank assets worth $300-$350 billion, primarily held in European, U.S., and British government bonds within a European securities depository.

Early-Stage Peace Discussions and Russia’s Proposal

While negotiations remain in their infancy, one concept emerging in Moscow suggests that Russia could agree to the release of a significant portion of the frozen reserves to help rebuild Ukraine, potentially as part of a broader peace agreement, according to sources familiar with the matter.

The war has left vast areas of eastern Ukraine in ruins, with millions displaced and hundreds of thousands of casualties on both sides. The World Bank estimated in 2023 that Ukraine’s reconstruction would require $486 billion.

Reuters sources, who requested anonymity due to the sensitive nature of the discussions, stated that the Kremlin has not publicly commented on this potential compromise. If true, it could provide insight into Russia’s negotiation stance as Moscow and Washington explore paths to end the war—particularly as Trump pushes for U.S. access to Ukrainian mineral resources in exchange for past military and financial support.

Diverging Demands: Russia, Ukraine, and the U.S.

Russia has set forth key conditions for halting hostilities, including:
• A full withdrawal of Kyiv’s troops from the territories Moscow claims as its own.
• Ukraine renouncing its NATO aspirations.

Meanwhile, Ukraine maintains that:
• Russia must withdraw from all occupied territories.
• Security guarantees from the West are necessary for lasting peace.

The Trump administration has dismissed Ukraine’s position as "illusionary", arguing that its demands are unrealistic.

The Role of Frozen Russian Assets in a Peace Deal

The G7 previously stated that Russia’s sovereign funds would remain frozen until Moscow compensates Ukraine for war damages. However, Trump has signaled interest in reintegrating Russia into the G7, a move that could shift the debate over these assets.

Sources in Moscow suggest that Russia could be willing to allocate up to two-thirds of the frozen funds toward Ukraine’s reconstruction—if accountability measures are in place. The remainder, Russia insists, must be used in the territories under its control, which it considers part of its sovereign territory.

Additionally, Russia is likely to demand a gradual lifting of Western sanctions in return for any asset repurposing, according to a source familiar with Kremlin thinking.

Legal and Economic Complexities

Western officials remain divided on confiscating Russia’s frozen reserves. Some, including members of Germany’s government and the European Central Bank, argue that such a move could trigger legal disputes and undermine confidence in the euro as a reserve currency.

Moscow has repeatedly denounced Western asset seizures as violations of free-market principles, warning that such actions damage global banking security. In retaliation, Russia has proposed legislation to seize the assets of companies and investors from "unfriendly" nations, though the bill has yet to be passed by the State Duma.

The Scope of Russia’s Frozen Reserves

At the time of the asset freeze, Russia’s central bank held:
• $207 billion in euros
• $67 billion in U.S. dollars
• $37 billion in British pounds
• Additional holdings in Japanese yen, Canadian dollars, Australian dollars, and Swiss francs

The largest portion of the frozen funds—€159 billion—is held by Belgium’s Euroclear Bank.

While Moscow has condemned the freeze, some Russian figures have suggested that a financial compromise could be reached if Russia retains control over the occupied regions. For instance, Margarita Simonyan, head of Russian state broadcaster RT, proposed in 2023 that Russia should accept the funds in exchange for formalizing its territorial claims.

Future Outlook: A Possible Breakthrough or a Deadlock?

Although discussions remain preliminary, Russia’s apparent willingness to negotiate on frozen assets could signal a shift in its diplomatic approach. However, significant obstacles remain—especially given Western hesitations and Russia’s insistence on retaining control over occupied territories.

With Trump advocating for negotiations with Moscow and Ukraine seeking stronger Western backing, the fate of Russia’s $300 billion in frozen assets could become a critical factor in shaping the outcome of peace talks.