The European Union's bid to use billions of dollars in frozen Russian assets for the reconstruction of Ukraine faces challenges amid concerns about risks to financial markets.

According to Politico, EU leaders backed unprecedented steps to use profits from Moscow's state assets for the reconstruction of Ukraine at a summit in late October. European Commission President Ursula von der Leyen promised to present clear plans by the end of this year.

However, some European governments are privately concerned about the risks to financial markets that could be caused by such a move. These fears now threaten to complicate von der Leyen's initiative.

Belgium owns most of the Russian state assets frozen at the beginning of the full-scale Russian invasion of Ukraine in the EU. The Belgian government is reluctant to agree to the raiding of funds intended to reconstruct Ukraine if the rest of the G7 countries do not take the same step together with the EU.

"We are looking with the G7 countries and the European Commission to have a structural solution for the frozen assets which doesn't destabilise the international financial system," Belgian Prime Minister Alexander De Croo said in a speech to diplomats on Monday.

Most Russian gold and currency reserves, frozen by the countries participating in the sanctions at the beginning of the war, are in the EU. Of these, EUR 180 billion is placed in Belgium’s Euroclear, a clearing house acting as a custodian for Russian reserves.

When Russian securities reach maturity and are reinvested by financial intermediaries, they generate income. Euroclear received EUR 3 billion in profit from frozen assets in the first nine months of this year.

Euroclear voluntarily segregated profits from the Russian assets, but says it incurred EUR 34 million in management and legal costs, as well as an estimated EUR 18 million in lost revenue. Asked about the EU's intentions to use these profits, Euroclear declined to comment.

The EU has long floated the idea of taxing these profits in favour of Ukraine, but the European Central Bank and some EU capitals, including Paris, Berlin and Brussels, have expressed doubts. They fear the move will shake up financial markets and weaken the euro's position as a reserve currency.

Belgium and Luxembourg, in particular, want guarantees that they will not be forced to bear all the legal and financial risks of such an unprecedented step. There is another clearing centre in Luxembourg that currently stores frozen Russian assets, Clearstream.

For De Croo, it is important to work on solving the problem not only within the European framework but also together with other countries of the G7.

US Treasury Secretary Janet Yellen recently showed more support for European plans to access frozen assets. G7 politically supported this idea.

However, the G7 initiative also risks further delays. The agreed wording in the G7 statement does not yet go beyond the "study" of how this money can be directed to support Ukraine.

A group of former and current government officials, diplomats and academics had written an open letter to the Group of Seven countries and the EU calling for Ukraine to be allowed to use Russia's frozen assets.