Since Russia launched its military campaign in Ukraine in 2022, the West has frozen about $300 billion in assets belonging to the Russian Central Bank, much of which is in European banks.
Interest rates from the above assets have been used to secure loans to Ukraine, but now, the pressure is increasing as the US - under the leadership of President Donald Trump - may withdraw financial support for Kiev.
In that context, the EU is looking for an alternative to help Ukraine continue fighting and maintain its economy. Some European leaders see a potential option of a complete seizure of frozen Russian assets, but the move is fraught with great risks, as the seizure of Russian assets could be a double-edged sword.
Although it could provide abundant financial resources to support Ukraine, the seizure of Russian assets raises many legal and economic problems. Historically, similar actions have often caused long-term consequences.
For example, in 2018, the Soviet Union seized the amount of gold that the Romania National Bank sent to Moscow. The wars in the 20th century also set many precedents for states to seize the property of opponents, but that often led to disputes that lasted for decades.
Another big problem is confidence in the European financial system. If the EU seizes Russian assets, other central banks may fear that their assets could also be seized in the future. This could see them withdraw reserves from European banks, weakening the euro on the international stage.
One of the reasons for Europe's caution is the increasingly weak position of the euro against the USD in the global financial system.
When the euro was born in 1999, Europe hoped it could compete with the US dollar as a global reserve currency. However, since 2010, the share of global reserves in euros has fallen from 25.8% to 20%, while the US dollar still dominates at 58.4%, according to Reuters.
The seizure of Russian assets could erode confidence in the European financial system, causing other countries to increase their reserves in USD or gold instead of euro. This further weakens the position of the common European currency in the global financial market.
Despite legal and economic concerns, political pressure is mounting on the EU for action.
At the recent European summit, countries such as Germany, France and Belgium still held their positions opposing the seizure of Russian assets. However, according to expert Mitu Gulati from the University of Virginia, US President Donald Trump's change of policy with Ukraine has caused many European leaders to reconsider their stance.
A central bank official in the eurozone also admitted that although the European Central Bank (ECB) will continue to protest the seizure of Russian assets, that may not stop politici from making decisions.
"The bill to support Ukraine has increased significantly, and this has made the money from Russia more attractive than ever," the official said.
Currently, the EU is facing a dilemma: either complying with legal principles to protect confidence in its financial system, or taking drastic action to seize Russian assets to support Ukraine.
