Freezing Russia's Reserves
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In February and March 2022, following Russia's invasion of Ukraine, the United States, European Union, United Kingdom, Canada, Japan, and Australia froze approximately $300 billion in Russian central bank assets held in Western financial institutions. This was not a seizure — technically, the assets remained Russian property — but they were immobilised: Russia could not access, sell, or move them. It was the largest sovereign asset freeze in modern history and a qualitative escalation in economic warfare that reverberated well beyond Russia.
What Was Frozen and How
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Russian central bank reserves are held in foreign currencies and assets as a buffer against economic shocks. By February 2022, Russia held approximately $640 billion in foreign reserves — accumulated partly as a "fortress Russia" strategy following 2014 sanctions. Of that total, roughly $300 billion was held in jurisdictions that participated in the freeze: EU central banks and financial institutions, the Belgian-based Euroclear clearing house, and other Western depositories.
The mechanism: Western jurisdictions passed regulations or executive orders freezing accounts and assets associated with the Russian central bank. Euroclear — which holds a large portion of the frozen assets — was instructed to hold them in place and not execute Russian instructions. The assets remained on Euroclear's books but Russia was denied the ability to transact with them.
The Precedent Problem
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The freezing was broadly supported in Western countries as a necessary response to the invasion. But it introduced a question that central banks and sovereign wealth funds globally were forced to consider: if the world's 11th largest economy could have its foreign reserves frozen by a Western policy decision, what protection do other countries' reserves actually have?
This is not a hypothetical concern only for countries with adversarial relationships with the West. Any country that perceives a future possibility of policy disagreement with the US or EU has a rational incentive to consider the concentration risk of holding reserves in Western institutions. The safety of reserve assets — previously assumed to be unconditional for any country not under active sanctions — had been revealed as conditional on the political relationship.
The Downstream Consequences
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The observable consequences were rapid. Central bank gold purchases accelerated significantly in 2022 and 2023, with emerging market central banks leading the buying. Gold, held domestically, cannot be frozen by a foreign jurisdiction. China, which had been diversifying away from dollar reserves since 2014, accelerated its diversification. Bilateral trade agreements settling in non-dollar currencies proliferated — not because those currencies were better monetary assets, but because they reduced dependence on a payment infrastructure subject to US pressure.
Barry Eichengreen and others have noted that these shifts are quantitatively small relative to the overall reserve system — the dollar remains overwhelmingly dominant. But the direction of change, and the mechanism driving it, is structurally different from previous shifts in reserve composition.