Britain Is Spending the Interest on Russia’s Frozen Money. Some call it theft

For centuries London’s selling point was simple: money kept here was safe from politics. From the days of empire, when the sun never set on British dominions, through the long twilight of decline, one asset endured—trust. Investors believed contracts would be honoured, vaults secure, banks solvent. Even when Britain lost its empire, the City’s word remained its bond.

Now that reputation is being spent.

The New Policy

After Russia’s invasion of Ukraine, the West froze about $300 billion of Moscow’s reserves. Freezing was expected. What came next was not: Britain and its European partners are now spending the interest those balances earn. The principal remains immobilised, but the income is diverted to fund Ukraine. Ministers boast that more than £1 billion has already been channelled this way; Brussels has wired €1.5 billion.

The official language is careful. Lawyers call this a countermeasure: temporary, proportionate, reversible. But to investors, the distinction collapses. The fruits of the asset are being taken for purposes the owner never consented to. In ordinary language, that looks like theft.

A Pattern of Contingent Custody

This is not the first time London has blurred the line. Years earlier, Venezuela stored 31 tonnes of gold in the Bank of England. After Britain recognised a rival government in Caracas, courts refused to release the bullion to the incumbents. No bar left the vault, yet Venezuela could not touch its property. The message was clear: when politics moves, custody becomes conditional.

That memory now sits alongside Russia’s diverted proceeds, forming a pattern. For countries outside the Western alliance—China, Gulf states, emerging economies—the warning is obvious. If Britain can use Russia’s interest today, why should their reserves be immune tomorrow?

Who Holds Britain Up

The stakes are large. Foreign investors own about a third of Britain’s gilt market, worth hundreds of billions, and nearly 40 percent of its commercial property. Chinese state funds are significant holders of both bonds and real estate. Almost 190,000 homes in England and Wales are registered to overseas addresses. Britain’s fiscal programme depends on that confidence. The Debt Management Office will sell nearly £300 billion in new gilts this year.

If overseas investors no longer trust London, they will not issue press releases. They will simply shorten maturities, trim allocations, and ask for more yield. The protest will appear in the spread, not the speech.

The Erosion of a Premium

Britain’s advantage was never cheap labour or abundant resources. It was reputation—that the rules did not bend. Now that premium is being frittered away. Each time a minister boasts that “Russian money” is paying for British weapons, investors hear something colder: politics sits above property.

From the empire’s banks to the postwar City, Britain’s financial identity rested on solidity. Our banks did not fail. Our bonds did not default. Our word was our bond. That inheritance has survived every imperial retreat. But trust, once broken, does not return easily.

The government may win its legal argument. The market will deliver its own verdict. And in that courtroom, the charge is not complexity. It is simple: a nation that spends other people’s money cannot expect other people to keep lending it theirs.