The freezing and confiscation of state assets has become one of the most contested issues in contemporary international law. Following Russia’s invasion of Ukraine in February 2022, Western governments immobilized approximately $300 billion of Russian Central Bank reserves held abroad, most of them located in European financial institutions. Although these assets remain formally “frozen” rather than confiscated, debates in the United States and the European Union increasingly focus on whether such reserves may legally be used to finance Ukraine’s reconstruction.
The Russian case is often presented as unprecedented. However, Iran has faced similar measures for decades. After the 1979 Iranian Revolution and the hostage crisis at the U.S. embassy in Tehran, the United States froze billions of dollars in Iranian government assets under Executive Order 12170.3
The dispute was eventually addressed through the 1981 Algiers Accords, which established the Iran–United States Claims Tribunal and provided mechanisms for resolving claims and releasing certain blocked assets.
Iranian assets have also been targeted in terrorism-related litigation before U.S. courts. In the landmark case of Bank Markazi v. Peterson (2016), the U.S. Supreme Court upheld legislation permitting approximately $2 billion in assets linked to the Central Bank of Iran to be distributed to victims of terrorism-related attacks.
Iran challenged these measures before the International Court of Justice in Certain Iranian Assets (Iran v. United States), arguing that the seizures violated principles of sovereign immunity and international law obligations under the 1955 Treaty of Amity.
More recently, the issue resurfaced in the context of sanctions negotiations. In 2023, the United States and Iran reportedly reached an arrangement involving approximately $6 billion in previously frozen Iranian oil revenues held in South Korea. Importantly, the funds were not fully released without conditions; they were transferred to restricted accounts in Qatar and reportedly limited to humanitarian transactions such as food, medicine, and medical equipment. The situation which come into debate during US-Iran MOU.
This arrangement raises broader legal and political questions. Can states lawfully restrict the use of frozen sovereign assets to humanitarian purposes only? More fundamentally, do asset freezes and seizures conflict with the long-standing doctrine of sovereign immunity in international law?
Sovereign Immunity and the Legal Status of State Assets
The doctrine of sovereign immunity is rooted in the principle of sovereign equality of states. Traditionally, one sovereign cannot exercise authority over another without consent. This protection applies both to immunity from jurisdiction and immunity from enforcement measures against state property. The modern framework is reflected in the United Nations Convention on Jurisdictional Immunities of States and Their Property (2004). Although the Convention has not achieved universal ratification, many of its provisions are widely regarded as reflective of customary international law. The Convention provides especially strong protection for property used for sovereign purposes, including central bank reserves. Article 21 specifically identifies the property of central banks and other monetary authorities as immune from enforcement measures.
The distinction between freezing and confiscation is legally important. Freezing, or immobilization, generally prevents access to assets without transferring ownership. Confiscation or seizure, by contrast, involves a permanent deprivation and possible transfer of title.
Many governments defending sanctions regimes argue that freezing sovereign assets constitutes a temporary regulatory measure rather than unlawful expropriation. The legality of such measures depends partly on context. Asset freezes imposed pursuant to United Nations Security Council resolutions under Chapter VII of the UN Charter possess a clear legal basis. More controversial are unilateral sanctions and domestic court judgments affecting foreign sovereign assets absent Security Council authorization.
The Debate Over Sovereign Asset Seizures
Supporters of freezing or seizing sovereign assets argue that such measures are increasingly necessary in response to serious violations of international law. In the Russian case, proponents contend that immobilized reserves could help finance Ukraine’s reconstruction and serve as leverage against continued aggression. In the Iranian context, supporters of judicial seizures in U.S. courts argued that sovereign immunity should not shield states accused of supporting terrorism. Others defend limited humanitarian releases of frozen assets—such as the partial release of Iranian funds for medicine and food—as a practical compromise between sanctions enforcement and humanitarian concerns. From this perspective, asset restrictions have become legitimate tools of accountability and economic pressure in international relations.
At the same time, critics warn that these measures risk undermining one of the foundational principles of international law: sovereign immunity. Central bank reserves have traditionally enjoyed strong protection from enforcement measures, and many legal scholars argue that permanent confiscation exceeds what international law permits even as a countermeasure. Opponents also caution that politicized seizures may weaken trust in the global financial system and encourage states to move reserves away from Western financial institutions. Transforming sovereign assets into instruments of geopolitical pressure could create dangerous precedents for future international disputes.
Is International Law Changing?
The experiences of Iran and Russia suggest that the practical operation of sovereign immunity is undergoing significant transformation. While the formal doctrine remains intact, state practice increasingly reflects efforts to balance immunity against accountability and geopolitical considerations. Asset freezes have become normalized within sanctions policy. Confiscation, however, remains far more controversial. Even among Western allies supporting Ukraine, disagreements persist regarding whether permanent seizure of Russian sovereign reserves would violate international law and destabilize global financial markets. At the same time, the political effectiveness of asset immobilization is undeniable. Frozen sovereign assets have become instruments of strategic leverage in diplomacy, sanctions negotiations, and post-conflict bargaining. The conditional release of Iranian funds for humanitarian purposes demonstrates how financial restrictions can be calibrated to exert pressure while avoiding complete economic isolation.
This evolution suggests that sovereign immunity is no longer treated as an untouchable principle. Instead, it is increasingly weighed against competing objectives such as accountability, reparations, sanctions enforcement, geopolitical influence and maintaining international security. The result is a gradual but significant shift: the freezing of sovereign assets is no longer merely a technical legal mechanism but a central instrument of modern economic statecraft.
Conclusion
From Tehran to Moscow, disputes over sovereign asset seizures reveal a growing tension between traditional legal protections and contemporary geopolitical realities. The principle of sovereign immunity remains formally recognized in international law, particularly regarding central bank assets. Yet state practice increasingly tests the limits of that protection.
Iran’s decades-long experience with frozen and judicially attached assets illustrates that the issue long predates the war in Ukraine. Russia’s case, however, has elevated the debate to an unprecedented scale and raised broader questions concerning the future of the international financial system. Whether international law itself is fundamentally changing remains contested. What is increasingly clear, however, is that sovereign asset freezes are no longer purely legal instruments. They have evolved into tools of political and economic pressure, blurring the line between legal enforcement and geopolitical strategy. If permanent confiscation of sovereign reserves becomes normalized, the implications for sovereign immunity, reciprocity, and confidence in the global financial order may be profound.
Sara Famoori