The EU’s shift from sanctions to economic power: legal implications of sovereign asset neutralisation
Virna Rizzo – 15/04/2026
Beyond the traditional sanctions framework, the European Union is increasingly deploying its emergency economic powers to neutralise foreign sovereign assets.
The recourse to Article 122 TFEU in the context of the war in Ukraine signals the emergence of a form of economic exceptionalism producing quasi-sanctioning effects, and fundamentally reshaping the contours of legal certainty and compliance within the Union.
The EU’s legal response to the Russian Federation’s war against Ukraine continues to profoundly transform its normative architecture.
Historically grounded in the instruments of the Common Foreign and Security Policy (CFSP), this response has undergone a decisive shift since December 2025 with the adoption of a regulation based on Article 122 of the Treaty on the Functioning of the European Union (“TFEU”).
Through this instrument, the Union no longer merely reacts to internationally wrongful conduct through sanctions; it actively mobilises its emergency economic competences to durably neutralise foreign sovereign assets located within its jurisdiction.
This development constitutes both a conceptual and legal turning point, with far-reaching implications for asset security and compliance obligations.
A shift in legal basis
On 12 December 2025, the Council adopted a regulation grounded in Article 122 TFEU, which allows for the adoption of emergency measures in situations of severe economic disturbance (1).
The regulation targets the assets and reserves of the Central Bank of Russia, as well as those of entities acting on its behalf, held within the Union.
Since February 2022, approximately €210 billion in such assets had already been immobilised under CFSP sanctions, which restricted transactions relating to their management without imposing a comprehensive and autonomous prohibition on transfers.
Recourse to Article 122 TFEU marks a fundamental departure from that framework.
By characterising the economic consequences of the war as a serious and persistent disruption affecting the Union, the Council introduced a temporary prohibition on any direct or indirect transfer of the assets in question.
This legal basis allows for adoption by qualified majority, without the involvement of the European Parliament, thereby departing from the unanimity requirement inherent in the sanctions regime.
More significantly, it reframes the measure as one aimed at safeguarding the Union’s internal economic order, rather than pursuing a purely external coercive objective.
Neutralisation of sovereign assets
The December 2025 regulation establishes a structured legal framework for the prohibition on transfers, incorporating :
- a detailed proportionality assessment,
- periodic review mechanisms,
- reporting obligations entrusted to the Commission (2).
The measure is framed as temporary, conditional, and reversible, its duration being linked to :
- the cessation of hostilities,
- the payment of reparations,
- the disappearance of the serious economic risk to the Union.
Legally, this evolution significantly alters the status of the assets concerned.
They are no longer merely frozen in their use, but effectively neutralised—excluded from any circulation outside the EU legal order for as long as the regulatory conditions remain unmet.
This neutralisation does not amount to confiscation: the regulation neither effects a transfer of ownership nor formally challenges the principle of sovereign immunity.
However, it subjects the economic effects of such assets—particularly the financial flows they generate—to enhanced regulatory control.
Sanctions versus economic exceptionalism
The distinction from the classical sanctions regime is therefore essential.
- CFSP sanctions pursue foreign policy objectives and rely on political renewal through unanimity.
- Article 122 TFEU measures operate within a framework of internal economic risk management, relying on exceptional powers justified by objective economic criteria and adopted by qualified majority.
This gives rise to a hybrid regime in which measures not formally classified as sanctions nonetheless produce comparable effects, while benefiting from greater legal durability.
Such hybridisation blurs the traditional boundaries between economic law, foreign policy, and security, and reflects the emergence of a genuine doctrine of economic exceptionalism with quasi-sanctioning effects.
A contested legal precedent
The adoption of this regulation was not achieved through full political consensus.
Several Member States raised concerns regarding :
- the precedent it sets
- its potential implications for the legal certainty of sovereign assets.
Hungary and Slovakia expressed open opposition.
These reactions underscore the institutional sensitivity of the shift underway, without diminishing its significance. Their being overridden instead reflects a conscious acceptance at Union level of an expansion of exceptional powers — albeit at the cost of reduced legal predictability.
Compliance and the emergence of a legal grey zone
For economic operators, this development profoundly alters the nature of legal risk.
The absence of designation on a sanctions list can no longer be relied upon as a sufficient guarantee of legal certainty.
The holding, management, or intermediation of assets linked to geopolitically exposed States may become legally sensitive by virtue of their economic and strategic context alone, irrespective of any formal unlawfulness.
This uncertainty is particularly acute with respect to financial products generated by neutralised assets, whose management may be dissociated from ownership of the underlying capital.
In this evolving landscape, compliance can no longer be reduced to a formalistic exercise of regulatory adherence.
It is increasingly becoming a forward-looking tool of risk anticipation and governance, encompassing an assessment of legal bases that may be activated in times of crisis.
By institutionalising the exception, the European Union effectively acknowledges that economic security may justify sustained restrictions on the circulation and availability of sovereign assets.
This dynamic creates a legal grey zone that is poised to become a central concern for international economic actors.
(1) Article 122 of the Treaty on the Functioning of the European Union
(2) Council Regulation (EU) 2025/2600 of December 12, 2025, on emergency measures in response to the economic consequences of the war in Ukraine.