Some $300bn was frozen in the European Union, United States, United Kingdom, Canada and Japan – about half the bank’s holdings – as Ukraine’s allies sought to hobble Russia’s ability to wage war.

Legally, the money belongs to Russia, but the EU, which holds the largest chunk – about $207bn – is struggling to find a legal way to use Russia’s money to rebuild Ukraine’s shattered infrastructure.

Some experts believe Russia’s money could even be used to generate immediate benefits for Ukraine’s war effort – especially since $60bn of US military aid remains stalled in Congress.

On January 29, EU leaders told European financial institutions to keep separate accounts for Russian-immobilised money, along with any profits made from investing it, pending a decision on what to do.

“This decision paves the way for the council to decide on a possible establishment of a financial contribution to the EU budget raised on these net profits to support Ukraine and its recovery and reconstruction at a later stage,” said the European Council. The G7 supported its decision.

“So far, the EU has been putting out into the public domain the idea of taxing this money,” Anton Moiseienko, an international law expert at Australian National University, told Al Jazeera.

A ‘recognised debt’

Tax on the profits made from investing the money is said to amount to about $2.5bn.

“What we’re seeing today is the beginning of a more ambitious approach … separating the profits suggests that the entire [proceeds] might be sent to Ukraine,” Moiseienko said.

The proceeds could amount to between $15bn and $17bn over four years.

The legal reasoning is that Russia will, at some point, be called upon to pay compensation for invading Ukraine.

“What we have here is a recognised debt. Russia owes reparations to Ukraine,” said Moiseienko. “At some point, it does become rather perverse that we all know Russia owes the debt and we’re going to pay Ukraine to rebuild but we’re not going to touch the Russian money.”

Some law experts go further.

“I would invest it in the defence industry,” Maria Gavouneli, an international law professor at Athens University and director of the Hellenic Foundation for European and Foreign Policy, a think tank, told Al Jazeera.

“We wouldn’t be buying bullets to send Ukraine, we’d be making bullets to send Ukraine. Under such a formula, you could use the entire principal [of $207bn] as well as the proceeds,” Gavouneli said.

EU Internal Market Commissioner Thierry Breton last month floated the idea of a 100-billion-euro ($108bn) European Defence Investment Programme (EDIP), to revive Europe’s dormant defence industries, without specifying where the money would come from.

Investing Russia’s money would enable the EU to plough vast resources into raising the production of artillery rounds and air defence missiles which Ukraine sorely needs.

It would, perhaps, be the first time in history that an aggressor’s assets would be used to help the defender’s war effort, Gavouneli said.

But, she said, it would not amount to a confiscation of Russian assets, which would be illegal.

“When the war is over there has to be an accounting. It has to be clear that Russia’s property can be returned to Russia. If it is going to be kept against reparations [to rebuild Ukraine], that will be decided at that time,” she said.

Ukrainian experts go further, still. Russian money could be leveraged and used as collateral for loans worth several times its nominal value, Tymofiy Mylovanov, president of the Kyiv School of Economics, told Al Jazeera.

“You can get much more than the proceeds if you need to,” Mylovanov said. “It also serves to bring a sense of fairness.”

Why hasn’t it been done already?

As attractive as all this sounds, there are also serious risks involved, bogging the discussion down in a legal and political morass of dissent and fear of consequences.

The EU was meant to propose a legal formula to make use of Russia’s assets last December, but nothing of this emerged publicly. Another discussion was to be held earlier this month – but, again, there was no decision.

One fear is the risk of retaliation by Russia which, on December 29, said it had a list of European, US and other assets it could seize. Russian state news agency RIA put their value at $288bn last month.

RIA did not provide details, and it was not clear if this sum included assets Western companies have already written down or divested themselves of. For example, British Petroleum pulled out of a stake in Russian state oil company Rosneft, valued at $14bn, days after the war began. Shell withdrew from Russian gas projects valued at $3bn.

The greater fear, however, is the reputational impact on the US dollar and the Euro, currently the world’s two most dependable reserve currencies, attracting vast investments from governments, central banks, corporations and individuals around the world.

“It will undermine the confidence of other countries in the United States as well as in the EU as economic guarantors. Therefore, such actions are fraught with very, very serious consequences,” Kremlin spokesman Dmitry Peskov told journalists in December.

The European Central Bank agrees. “The euro is the second most important currency in the world, and we have to consider its long-term reputation,” said ECB Vice President Luis de Guindos late last year. “Weaponising a currency inevitably reduces its attractiveness and encourages the emergence of alternatives,” Bank of Italy governor Fabio Panetta said last month.

Despite all this, EU leaders have tried to hammer out a new legal theory that protects the reputation of the euro and deals a measure of justice for Ukraine.

‘Countermeasures’

Although states are obliged to respect the assets of other states, international law provides an exception known as countermeasures, Dapo Akande, professor of public international law at Oxford University, told Al Jazeera.

“Countermeasures just means that you are taking action which is ordinarily unlawful, but is justified as a response to a prior unlawful action by the other state,” said Akande.

In this case, Russia’s unlawful act was to wage a war of aggression, against the statutes of the United Nations Charter and its recognition of Ukraine’s borders in 1991.

Countermeasures carry an important condition, says Akande, “that the object of it is to induce compliance by the other state with its obligations, which means countermeasures have to be temporary and reversible and inducing compliance”. In other words, if Russia withdrew from Ukraine, its money should be returnable, so any investments made with it should be reversible.

The pricklier question is who can enforce countermeasures.

“Can the states that are not the direct victims of the violation, ie states that are not Ukraine, seize assets?” asked Akande.

“There’s been a growing number of lawyers who’ve come out and said yes, that would be perfectly lawful,” said Moiseienko.

Still, by acting on Ukraine’s behalf, the EU would be breaking new legal ground that Russia might challenge in European courts.

The impetus may ultimately be provided by unprecedented political circumstances. The longer US funding for Ukraine remains blocked by allies of presidential hopeful Donald Trump in Congress, and the more Russia challenges European sovereignty by pushing deeper into Ukraine, the less tenable it may become politically to hold in awe the untouchability of Russian assets.