The European Union faces legal and practical challenges when it comes to using Russian assets to support Ukraine’s defense and reconstruction efforts. As of now, European law prohibits the confiscation of the €28 billion in private Russian assets frozen in the EU. These assets belong to individuals such as oligarchs and military figures linked to Russia's war in Ukraine. While they are frozen, the EU cannot simply seize them unless there is proof of criminal activity, a process that is legally complex and would take years. If EU member states pursue these cases, they would face extensive delays, appeals, and legal maneuvers by the oligarchs involved, making it a lengthy and uncertain process.

This legal barrier is further complicated by concerns over the EU's economic stability. Leading European economies, including France, Germany, and Italy, argue that confiscating frozen assets would undermine investor confidence in the EU. There is fear that such a precedent could make it difficult to attract future investments, as investors may worry their assets could be targeted next. This is particularly concerning for investments from China, which is closely aligned with Russia and already critical of EU sanctions.

In addition to the frozen private assets, the EU is also holding €210 billion in Russian central bank assets. These are blocked under European sanctions following Russia's invasion of Ukraine, and the EU is using windfall profits from these assets to support Ukraine. The funds, generated by the blocking of transactions related to Russian reserves, are expected to amount to between €15 billion and €20 billion by 2027. The EU has already allocated €1.55 billion from these profits to Ukraine, with more planned for later this year.

However, the EU's plans face multiple risks. One significant issue is the potential unfreezing of Russian central bank assets before loans to Ukraine are fully repaid. EU sanctions, which are renewed every six months, could be vetoed by individual member states, particularly Hungary, which has already blocked military aid to Ukraine. This introduces uncertainty into the EU's ability to use the blocked assets for Ukraine's needs.

The financial risks also extend to the EU's broader economic stability. Historically, the EU has been seen as a secure place to store sovereign assets, but the possibility of seizing assets for political reasons could damage this reputation. The fear is that other authoritarian states might follow Russia's example and withdraw their assets from the EU, potentially affecting the value of the euro and the EU's financial standing in the world.

The EU faces a delicate balance in managing these assets. While there is a clear legal framework preventing the immediate confiscation of Russian assets, the ongoing war in Ukraine and the need for support raise important questions about the future of these funds. The EU must navigate both the legal and economic risks involved, particularly as it works to provide Ukraine with continued financial aid without undermining investor confidence in the bloc's stability.