The Russian flag flies on the dome of the Kremlin Senate building behind Spasskaya Tower, in central Moscow, Russia, May 4, 2023. [Photo/Agencies]

The European Union's decision last week to use profits from frozen Russian assets for Ukraine's reconstruction has drawn a strong backlash from Moscow, which has threatened it would confiscate more EU assets in retaliation.

The European Council summit which concluded on Friday agreed to use profits generated by frozen Russian state assets for Ukraine's reconstruction. It also mandated the European Commission to prepare the necessary legal proposal by the end of the year for implementation, a move pushed by commission president Ursula von der Leyen for over a year.

About $280 billion of Russian foreign reserves have been frozen by countries that participated in the sanctions against Russia following the Russia-Ukraine conflict that began on Feb 24, 2022.

More than 200 billion euros ($211 billion) sit in the EU, mostly in Belgium held at the Euroclear, an international central securities depository. As the securities reach maturity and are reinvested by financial agencies, they have generated a huge profit.

The G7 finance ministers and central bank governors also sent a similar message in a statement on Oct 12.

On Sunday, Russian State Duma Chairman Vyacheslav Volodin hit back, saying that Moscow is preparing to retaliate by confiscating the assets of "unfriendly" EU nations.

Volodin said if the EU forges ahead with the proposal, Russia's reaction would inflict more economic pain on the EU than the other way around.

"A number of European politicians, led by the president of the European Commission Ursula von der Leyen, have once again started talking about stealing our country's frozen funds in order to continue the militarization of Kyiv," Volodin said in a statement on social media platform Telegram. "Such a decision would require a symmetrical response from the Russian Federation. In that case, far more assets belonging to unfriendly countries will be confiscated than our frozen funds in Europe."

Reservations voiced

Inside the EU, the European Central Bank and some EU member states, such as France and Germany, have voiced reservations about the bloc's move, saying such actions could weaken the euro's standing as a reserve currency because it will prompt other central banks to quit euro-denominated assets and hurt the European financial markets.

While Belgian Prime Minister Alexander De Croo said earlier this month that Belgium will invest 1.7 billion euros next year to assist Ukraine by drawing on its own tax revenue from frozen Russian assets, he had demanded that all legal, macroeconomic and monetary risks involved be taken into consideration.

Luxembourg's outgoing Prime Minister Xavier Bettel, whose country also held frozen Russian securities, called for prudence.

The EU is struggling to keep funding Ukraine as the conflict sees no end in sight.

At the summit, Hungarian Prime Minister Viktor Orban opposed the EU plan to provide 50 billion euros in aid to Ukraine while Slovakia's new Prime Minister Robert Fico expressed reservations over extending new financial support to Kyiv, citing corruption in the country.

All 27 members should unanimously consent to the aid package in the EU's 2024-27 budget.

In the United States, the Republican-controlled House of Representatives is challenging the $60-billion aid sought for Ukraine by President Joe Biden.