The Great Taking of the Russian assets

Webb meets Brussels

This post is inspired by Parallel Mike’s excellent work and David Webb’s book “The Great Taking”.

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Mark your agendas! Thursday December 18, European leaders will meet in Brussels to finalize a decision that could trigger the largest wealth confiscation mechanism in history. Russia’s €210 billion. What matters actually even more is the precedent that is being established. If security entitlements can be nullified for Russia, they can be nullified for anyone.

First they came for the Communists
And I did not speak out
Because I was not a Communist

Then they came for the Socialists
And I did not speak out
Because I was not a Socialist

Then they came for the trade unionists
And I did not speak out
Because I was not a trade unionist

Then they came for the Jews
And I did not speak out
Because I was not a Jew

Then they came for me
And there was no one left
To speak out for me

— Martin Niemöller

Here’s what’s at stake. The European Union is moving forward with a plan to convert this €210 billion in frozen Russian Central Bank assets into collateral for a “reparations loan” to Ukraine. On the surface, this seems straightforward. Bad Russia invaded. Bad Russia destroyed. Bad Russia pays. But the mechanism being used to accomplish this hides something far more insidious. It proves that nobody - not sovereign nations, not pension funds, not you - actually owns the securities held in the Western financial system.

No matter where you stand on the Russian issue, the mechanism I’m about to explain matters more than the politics.

1. Explaining the custody structure

To understand what’s happening, you need to understand how securities are actually held in the modern financial system. When Russia’s Central Bank purchased €197-202 billion in European bonds and securities, those assets didn’t go into a Russian vault. They went into Euroclear - a Central Securities Depository (CSD) based in Belgium.

Euroclear doesn’t hold these assets “for” Russia in any meaningful sense. Russia doesn’t have an account with its name on €197 billion. What Russia has is something called a “security entitlement.” Not ownership. An entitlement.

This legal distinction is everything.

When any entity buys securities through the modern system, they don’t receive the actual real underlying asset. They receive a claim on an asset held by the CSD. The CSD holds legal title. They just hold a beneficial ownership. The security itself exists only as a digital entry on the CSD’s books (Euroclear in this case). There is no physical certificate. There is no segregated account with your name on it. There is only a ledger entry showing that you’re entitled to a certain amount of a certain security.

Here’s what that means in practice: Euroclear owns the securities. You own a promise.

Think of it like a bank deposit. You deposit $1,000 in a bank. The bank now owns that $1,000 - it’s the bank’s money, not yours anymore! You have a contractual claim to get $1,000 back. The bank can lend out “your” money because it’s actually the bank’s money. This works fine until everyone wants their money back at once. Then you discover your deposit was never really “yours” - it was a claim against the bank.

Securities work the same way. When Russia “bought” €197 billion in European bonds and deposited them at Euroclear, Euroclear received legal title. Russia received a contractual claim. The ledger shows “Russia: €197B” but that’s not ownership. That’s a debt Euroclear owes to Russia. Euroclear owns the actual securities and can do whatever it wants with them - including pledging them as collateral to major banks for derivatives and settlement operations.

This is why Euroclear can use “your” securities as collateral. Because they’re not your securities. They’re Euroclear’s securities. You just have a promise that you’ll receive the economic value. And promises mean nothing when the counterparty goes bankrupt and secured creditors show up to seize the assets.

And here’s where it gets dangerous. All of these securities - Russia’s bonds, French pension fund holdings, German insurance company assets, your brokerage account - they’re all co-mingled in one giant pool. Unsegregated. Fungible. One massive pile of assets where individual ownership exists only as accounting entries, not as separate, identifiable property.

This is called the “security entitlement” structure. It replaced the old system where you actually owned securities represented by physical certificates that you could hold, store, or lock in your own vault. That system ended in the 1990s when a coordinated global effort transformed securities from property into contractual claims.

2. How the transformation happened

The change wasn’t accidental. Starting in 1994 in the United States, the Uniform Commercial Code Article 8 was rewritten to replace ownership with security entitlements. Similar changes followed in every major financial jurisdiction. The European Union harmonized its laws through the EU Securities Settlement Regulation. The pattern was global, coordinated, and deliberate.

The stated justification was efficiency. Physical certificates were cumbersome. Settlement took days. Dematerialization would make markets faster, cheaper, more liquid. All valid reasons. All true. But the legal changes went much further than was purely necessary for efficiency. They fundamentally altered who owns what in a crisis.

Under this new structure, when a CSD fails or enters insolvency, the securities in the co-mingled pool can be seized by secured creditors to satisfy their claims. The secured creditors are the major banks who have pledged the entire pool as collateral for their derivatives positions. The people who thought they owned those securities - the beneficial owners - become unsecured creditors in the bankruptcy. Which means they get in line behind the secured creditors. Which means they get nothing.

3. Why the securities can’t simply be returned

You might think: “Why not just return everyone’s securities? The ledger shows who owns what. Just give it back.”

Three reasons why that’s impossible:

First, there are no individual securities to return. All securities are co-mingled in one pool. There isn’t a pile with Russia’s name next to a pile with France’s name. There’s ONE undivided pool with ledger entries showing who has claims on what portions.

Second, the entire pool is already pledged as collateral. Remember: Euroclear has legal title. Euroclear has pledged the whole pool to major banks to back derivatives and settlement operations. The pool is serving as collateral right now. You can’t return something that’s already been pledged to someone else.

Third, bankruptcy hierarchy. When the CSD fails, secured creditors (the banks who hold the collateral pledge) are first in line. Beneficial owners (Russia, pension funds, you) are unsecured creditors with claims against an empty estate. The secured creditors aren’t stealing - they’re exercising their legal right to seize collateral. Courts will enforce it. Bankruptcy judges will follow the priority rules. And everyone will say “the law is the law.”

This is what financial researcher David Webb documented in his book “The Great Taking.” What he discovered is a mechanism built into the foundation of the global financial system that allows secured creditors to appropriate all securities held in custody during a systemic crisis.

The $2-4 quadrillion derivatives market is ultimately backed by the securities held in CSDs worldwide. When those derivatives collapse - and Webb argues they’re designed to collapse - the collateral gets seized. Pension funds, insurance companies, sovereign wealth funds, individual investors. Everyone loses everything except the banks who structured the system this way.

Until now, this has been theoretical. Webb’s critics called it conspiracy theory. They said it could never happen because governments would intervene. They said the legal protections were sufficient. They said beneficial ownership had real meaning.

4. Russia is proving them wrong in real time.

Russia has €197 billion in security entitlements at Euroclear. Russia is the beneficial owner. Russia followed all the rules. Russia purchased these securities legally, held them properly, did everything right according to the system. And now Russia cannot access a single euro. Not because Russia violated any law governing securities ownership (remember, we’re not talking or discussing the Ukraine war! We’re talking about legal matters here). But because the European Union decided Russia’s actions in Ukraine justified freezing Russia’s claims.

Note the language carefully. The EU didn’t seize Russia’s securities. The EU froze Russia’s security entitlements. Russia still technically owns the securities. Euroclear still has a contractual obligation to honor Russia’s claim. But Russia cannot enforce that claim because the EU invoked emergency powers to indefinitely prohibit any transfer of the assets back to Russia.

On December 12th, the EU Council formally implemented this prohibition using Article 122 of the Treaty on the Functioning of the European Union - a clause meant for economic emergencies like pandemics. The EU argued that allowing Russia to access its assets would enable further war in Ukraine, which poses “serious economic impact” to the European Union. Therefore, emergency powers apply. Therefore, the assets stay frozen indefinitely until Russia pays war reparations. Which means… never.

This legal maneuver accomplished something remarkable. It proved that security entitlements can be nullified by government decree when circumstances warrant. It demonstrated that beneficial ownership is subordinate to state power. It showed that CSDs will comply with government orders even when those orders violate their contractual obligations to clients.

But resistance is building. Seven EU member states - Belgium, Hungary, Slovakia, Italy, Bulgaria, Malta, and Czech Republic - now openly oppose the next step. That’s over a quarter of the EU. According to Euractiv, any attempt to push through the expropriation “will cause a serious rift within the EU.”

The European Commission is pushing forward anyway. The reparations loan structure would take Russia’s frozen assets and pledge them as collateral for €140-165 billion in loans to Ukraine. Ukraine gets the money now. Ukraine only repays it after the war ends, after sanctions lift, and after Russia pays war damages. Which means… never. So the loan becomes a grant funded by seized Russian assets.

Euroclear would transfer Russia’s €197 billion in assets to a newly created EU financial instrument. That instrument issues bonds. Ukraine receives the proceeds. The bonds are repaid - in theory - when Russia eventually pays reparations. But in reality, Russia never pays, Ukraine never repays, and the EU keeps the assets permanently.

When you are the law, is stealing stealing?

From Russia’s perspective, this is straightforward theft. But from a legal perspective, the EU can argue it’s not theft because Russia’s beneficial ownership never gave Russia true ownership to begin with. Russia only had a claim. That claim can be redirected, restructured, or subordinated when legal justification exists. The EU says justification exists. Therefore, the transformation is legal.

5. Why this triggers Webb’s mechanism

This is where David Webb’s research becomes uncomfortably relevant.

Webb identified the exact legal framework being used against Russia. He documented how UCC Article 8 and international harmonization created a system where beneficial ownership provides no protection in a crisis. He explained how the co-mingled pool structure allows secured creditors to seize everything. He warned that a coordinated effort had built a global mechanism for the largest wealth confiscation in history.

What Webb predicted was that a financial crisis would trigger emergency provisions. The emergency would justify extraordinary measures. The measures would activate the seizure mechanism. And secured creditors - the major banks with derivatives exposure backed by the securities pool - would invoke their legal priority and take everything.

Russia isn’t facing a financial crisis trigger. Russia is facing a political trigger. But the mechanism is identical. Emergency powers invoked. Beneficial ownership overridden. Assets seized despite contractual obligations. The CSD complying with government orders. And most importantly, the precedent established that security entitlements can be nullified when circumstances require.

Here’s the cascade Webb predicted:

1. a trigger event creates crisis conditions. Russia’s invasion of Ukraine serves this purpose.

2. governments invoke emergency powers to freeze assets. Article 122 accomplished this on December 12th.

3. frozen assets get converted into collateral for new obligations. The reparations loan does this on December 18th if approved.

4. the seizure creates legal precedent that beneficial ownership can be subordinated. This happens automatically when Russia’s claims are overridden.

5. other asset holders see the precedent and begin withdrawing from the system. This is already happening - China has pulled $140+ billion from Euroclear since 2022.

6. the withdrawal creates liquidity pressure on CSDs who cannot honor all claims simultaneously because assets are co-mingled and some are pledged. This is where Euroclear is now - facing €197 billion in Russian claims it cannot satisfy, plus 100+ lawsuits from Russian entities, while holding only €6.8 billion in capital.

7. the liquidity pressure triggers CSD insolvency or near-insolvency. This hasn’t happened yet but Euroclear’s CEO has warned it’s coming.

8. CSD insolvency activates the secured creditor provisions. The mega-banks who pledged the co-mingled pool as collateral for derivatives positions invoke their legal priority.

9. secured creditors seize the entire pool. Everyone with security entitlements becomes unsecured creditors with worthless claims.

10. the Great Taking is complete. The largest wealth transfer in history occurs through entirely legal mechanisms built into the foundation of the system.

Russia is currently at step five. Euroclear is approaching step six. The mechanism is activating exactly as Webb described, just with a different trigger than he anticipated.

6. The numbers game

Euroclear currently holds €197-202 billion in Russian Central Bank assets. This represents roughly 85% of Euroclear’s total balance sheet. Euroclear’s capital - the buffer it has to absorb losses - is €6.8 billion. Russia’s potential claim if it wins legal challenges: the full €197 billion. Plus damages. Plus lost interest since 2022. Plus punitive amounts.

If Russia recovers even 3% of its claims through court judgments, Euroclear’s capital is wiped out. If Russia recovers 10%, Euroclear is insolvent by a factor of three times its capital. If Russia recovers the full amount, Euroclear faces liabilities 30 times larger than its ability to pay.

Russia has already filed lawsuits in Moscow courts claiming damages from Euroclear’s “unlawful actions” in freezing access to Russian funds. It has promised to file in international tribunals, pursue “all available legal and other mechanisms” to recover its assets. Right now, €3 billion in Euroclear client funds held in Russian banks has already been seized as the opening move.

Euroclear isn’t facing just Russia’s claims. It’s facing more than 100 lawsuits from Russian oligarchs, companies, and individuals whose assets were also frozen even though they weren’t personally sanctioned. These claims total €53-60 billion. Many of these claimants have strong legal arguments under bilateral investment treaties between Russia and EU member states. These treaties protect investors from expropriation without compensation. The EU froze the assets using sanctions authority, but the individuals being sued argue they weren’t sanctioned personally and shouldn’t lose their property.

The EU has tried to create protection mechanisms. In December 2024, the EU Council introduced a “loss recovery derogation” allowing CSDs to unfreeze Russian cash to cover losses from Russian retaliation. Euroclear has already used this provision - it released €3 billion in Russian assets to compensate clients whose holdings were seized in Russia. This established the precedent that Russian assets can be taken to cover losses to other parties.

The EU is now telling Belgium that if Russia seizes Belgian sovereign assets in retaliation for the reparations loan, Belgium can offset those losses against the €210 billion frozen pool. And that Euroclear can offset any losses from Russian lawsuits the same way. This sounds like protection until you realize it only works if the offsetting happens before systemic collapse.

But offsetting assumes an orderly liquidation. It assumes these claims are resolved slowly through legal processes. It assumes Euroclear remains solvent while the claims proceed. It assumes other countries don’t panic and demand their assets back before the offsets execute.

Lots of assumptions. None of them certain.

7. Let the confidence cascade begin!

Belgium sees the trap that is laid out before them very clear.

Prime Minister Bart De Wever has called the reparations loan plan “like breaking into an embassy, taking out all the furniture, and selling it.” Belgium has filed dozens of pages of amendments demanding three things: legally binding guarantees from all EU members that Belgium won’t bear the legal costs alone, termination of all EU-Russia bilateral investment treaties that give Russia legal grounds to sue, and complete burden-sharing across all €210 billion frozen in Europe - not just the €185 billion at Euroclear.

Belgium isn’t alone. First there were 4, but this opposition bloc has now grown to seven countries - more than a quarter of the EU. Italy, Malta, Bulgaria, Czech Republic, Hungary, and Slovakia have joined Belgium in opposing the expropriation. These countries have issued joint statements calling for “alternative options in line with EU and international law” that present “significantly fewer risks.” According to Euractiv, any attempt to push through this decision will cause “a serious rift within the EU.” Seven out of 27 member states openly opposing represents the growing recognition that the reparations loan could destabilize not just the European financial system, but the European Union itself.

The real danger isn’t just Euroclear’s balance sheet. It’s what happens when every other holder of euro-denominated securities watches this precedent and draws conclusions.

China has already withdrawn $140+ billion from Euroclear since 2022. That’s a quiet capital flight happening while everyone focuses on the war. If the EU proceeds with the reparations loan, analysts estimate the remaining $400+ billion in Asian reserves will exit European CSDs within 6 to 12 months. The Gulf states are watching. Singapore is watching. Every sovereign wealth fund manager in the world is watching Russia lose €197 billion despite having done nothing wrong from a securities law perspective.

The message is clear: security entitlements aren’t secure. Beneficial ownership isn’t ownership. Your claim can be frozen, redirected, or seized when governments decide justification exists. And the justification can be anything - war, “emergency” economic conditions, tweeting the wrong pronouns or writing a critical blog post.

If even a fraction of foreign holders decide European CSDs are too risky, the withdrawal creates the exact crisis Webb described. CSDs face massive redemption demands. But they can’t honor all demands simultaneously.

And remember - that unsegregated pile is already pledged. The major banks have used the entire co-mingled pool as collateral for their derivatives positions. When redemption demands hit, the CSD can’t simply liquidate assets and return them to beneficial owners because those assets are already serving as collateral for someone else’s obligations.

This is the liquidity trap Webb warned about. The system works fine when everyone believes in their security entitlements and nobody demands physical delivery. But when confidence cracks, when people start demanding their actual assets back, the system reveals its fundamental structure: you never owned anything. You had a claim. That claim is subordinate to the secured creditors. And in a crisis, the secured creditors take everything.

8. Wednesday’s decision igniting the fuse

On December 18th, European leaders will decide whether to proceed with the reparations loan. If they approve it, several things happen immediately:

1. the precedent is formally established. Security entitlements can be confiscated and redirected without the owner’s consent when legal justification exists. The threshold for “justification” becomes whatever politicians can argue represents an emergency.

2. Russia escalates its legal campaign globally. Moscow has promised to pursue claims in every available venue - Russian courts, international tribunals, bilateral investment treaty arbitration, wherever they can get a hearing. Some of these claims will succeed. Even if Russia never recovers a euro, the legal victories establish that the EU violated international law. This undermines confidence in European financial institutions.

3. other countries accelerate their exit from European CSDs. If it can happen to Russia’s €197 billion, it can happen to anyone. China doesn’t want to be next. Neither does Saudi Arabia. Neither does Singapore. The withdrawal begins slowly but accelerates as each departure makes the remaining assets less secure.

4. the withdrawal creates the liquidity pressure Euroclear’s CEO warned about. Euroclear has earned €18.8 billion from Russian assets since February 2022. That’s free money - interest on assets Russia can’t touch. But if foreign holders pull $400 billion in EU assets, Euroclear and other CSDs lose these revenue streams and face the operational crisis of executing massive asset movements while dealing with lawsuits claiming it can’t legally honor Russian claims.

5. the pressure spreads beyond Euroclear to all European CSDs. France holds €18 billion in frozen Russian assets in private banks. Germany holds amounts they won’t disclose. Sweden and Cyprus hold pieces of the total. If Euroclear wobbles, confidence in all CSDs cracks simultaneously.

6. the derivatives exposure becomes visible. The co-mingled pool backing the derivatives isn’t just in Europe - the structure is global. US CSDs work the same way. Asian CSDs work the same way. The entire international securities settlement system uses security entitlements and co-mingled pools. If the European precedent triggers confidence loss, the cascade goes worldwide.

7. a major derivatives counterparty faces a margin call it cannot meet because the underlying collateral is suddenly uncertain. The collateral is securities held at CSDs. But those CSDs are facing redemption demands and legal challenges. The value of the collateral becomes questionable. The margin call triggers more margin calls. The cascade accelerates.

8. regulators invoke emergency provisions to prevent collapse. But the emergency provisions include the secured creditor seizure mechanism. The mechanism Webb documented. The mechanism that allows banks to take the co-mingled pool to satisfy their derivatives obligations.

9. the Great Taking occurs. Not as theft. Not as illegal seizure. But as the orderly implementation of the legal structure built into the system over the past 30 years. Secured creditors exercise their legal priority. Beneficial owners discover their entitlements are worthless. The largest wealth transfer in history happens through entirely legal means.

Russia is the test case. The proof of concept. The demonstration that beneficial ownership can be overridden when circumstances warrant. And once that precedent exists, the circumstances that “warrant” can be anything.

9. What Webb got right - and what he got wrong

Webb spent years documenting the legal framework that makes this possible. He traced the UCC Article 8 changes. He followed the international harmonization. He identified the secured creditor hierarchy. He explained the co-mingling structure. He warned about the derivatives exposure. He predicted the seizure mechanism.

What Webb got right: the mechanism is real. It’s built into the law. It’s coordinated globally. It gives secured creditors priority over beneficial owners. It allows seizure of the co-mingled pool in a crisis.

What Webb got wrong: the trigger. He thought it would be a financial crisis. A derivatives collapse. A banking panic. A market crash that created the emergency conditions justifying activation.

He didn’t anticipate the war in Ukraine. He didn’t foresee political justification replacing financial justification. He didn’t predict that the test case would be a sovereign central bank punished for invasion rather than a pension fund caught in market collapse.

But the mechanism? Webb got that exactly right. And Europe is proving it works.

On Wednesday, European leaders will decide whether to complete the test. Seven countries openly oppose the plan - over a quarter of the EU. The European Commission invoked emergency powers specifically to bypass unanimous consent requirements, allowing decisions by qualified majority. This means they can theoretically push it through despite the opposition. But doing so will fracture the EU itself, creating the political instability that accelerates the financial cascade.

The decision might not go through. Belgium has threatened legal challenges. Slovakia’s Prime Minister has said he’ll block any financing tied to Ukraine’s military expenses. Czech Republic has joined the opposition bloc. The internal EU rift may prevent the reparations loan from being approved Wednesday.

But the attempt itself is the trigger. Whether the decision passes or fails, the mechanism has already been activated. Russia knows its security entitlements can be nullified. Every state, every sovereign wealth fund manager sees the precedent being established.

The decision Wednesday determines the speed, not the direction.

If it passes, the cascade accelerates.
If it fails, the cascade merely slows while the underlying vulnerability remains visible to everyone paying attention.

Either way, Webb’s mechanism - the one critics said could never activate - is doing exactly what it was designed to do.

Converting beneficial ownership into claims.

Converting claims into nothing.

Taking everything.