Lawyers of the European Commission have come to the conclusion that the Central Bank of Russia (CBR) frozen assets must be returned to Russia after the war in Ukraine ends, Die Welt reported on April 13.

The publication cited an unpublished Commission report by the EC legal team, which concluded that the assets of the Central Bank of Russia cannot legally be seized and transferred to Ukraine due to the high legal barriers in place.

Immediately after the Russian invasion of Ukraine on February 24 last year the EC froze $300bn of CBR reserves held in EU countries.

While the EC has the power to freeze assets, thanks to strong European property laws the ownership of the assets remains with their original owner. The ownership of frozen assets can only be transferred to someone else if there is a conviction in a criminal case involving the assets, or, in the case of countries, if Europe declares war on Russia – something the Nato allies have been adamant they won’t do.

While there is a lot of support for confiscating the frozen money to pay for Ukraine’s reconstruction, the legal argument is that it would undermine European property rights.

"There is political will but legal barriers are high. The European Commission comes to a sobering conclusion that frozen assets cannot be touched, since once upon a time, when the war ends, they will have to be returned to Russia," Die Welt reported the document as saying.

As an alternative way of profitably using the money, the EC has suggested investing the frozen assets of the CBR in European government bonds and using the interest generated to make payments to Kyiv.

However, there is a hazard with this plan too, because if the investments lose money then who is responsible for the losses? Making European taxpayers pick up the bill to cover the losses and then return the full amount to Russia is politically very unattractive. The EU's legal service says it has not yet found a solution to the question of what to do if the funds are lost.

The EC legal team has also raised questions over how much CBR money has actually been frozen. As bne IntelliNews reported, the team says the figure $300bn is based on the CBR’s own reporting of how much it holds in Europe, but the CBR accounts are convoluted and the EC team says they have only been able to identify some $38bn of Russian central bank money and another $220bn of reserves actually in Europe (the rest is in the US and other countries) is missing. In addition, only $22bn of sanctioned oligarch money has been found compared to the $500bn-$600bn the top 86 billionaires are estimated to be worth by Forbes.

In the last month or so the EU has begun to set up a pan-EU bank reporting system to try to co-ordinate information on the location of Russian assets – both government and private – in Europe.