By: Dr Igor Kovač
One of the main geoeconomic questions for Europe is its relationship with Russia. This raises a timely inquiry: which geoeconomic weapons or tools are available to us, what effects they have, what the pitfalls of their use are, and what constitutes an acceptable level of risk in deploying them.
We often hear the idea of using Russian financial assets, frozen and held in European banks, for the reconstruction of Ukraine or to finance related efforts. But this geoeconomic weapon comes with several problems. First, while the freezing of assets has a solid legal basis, their seizure or use does not. It is highly likely that, in the event of lawsuits, courts would rule in favour of the asset holders, and we would be forced to return the money. Second, the euro would further lose credibility and its position in international financial flows, as many investors would begin to doubt the legal and political security of their investments in European banks and would stop placing funds in Europe. Third, although the absolute figure of these assets is large ($300 billion), the World Bank estimates that this covers only about half of what is needed to rebuild Ukraine. Russia, on the other hand, has already spent $500 billion on the war; the EU has spent less than $150 billion, or $250 billion if we include the costs of hosting Ukrainian refugees. For Europe to match Russia’s expenditures in Ukraine, it would need to spend around $1 trillion. European military spending is inefficient – weapon costs are three to four times higher than in Russia. Moreover, Russia has shifted to a wartime economy, with 40% of its national budget allocated to military spending. That is equivalent to what the U.S. spent in 1944 during World War II. Since 2022, Russian tank production has increased by 260%, missile production by 233%, and ammunition production by 261%. And even before this surge, Russia was already the world’s third-largest arms exporter. Therefore, seizing Russian assets would have more symbolic than strategic impact.
However, the current state of the Russian economy presents an opportunity for a much simpler geoeconomic weapon. Non-performing loans in Russian banks are around 6%, close to the standard risk threshold of 7%. Russian financial reserves are depleted, and gold reserves have dropped from 2,300 tons to 400 tons. The value of Russia’s sovereign wealth funds has shrunk to one-third of their pre-2022 levels. There is no economic growth. Apart from the arms industry, the only profitable sector is energy. And here lies something the EU can do to economically hurt Russia. As of August 2025, five EU countries still imported €979 million worth of Russian energy – Hungary, Slovakia, France, the Netherlands, and Belgium. The latter three import liquefied natural gas (LNG), while the first two import gas and oil via pipelines. The EU remains the fourth-largest market for Russian energy, after China, India, and Turkey.
Russia’s economy is on the brink, but due to its size, it can remain there for a long time. The EU could help tip it over the edge by immediately cutting off all energy imports. Yet the Danish presidency of the EU Council insists on a full phase-out of Russian gas only by January 1, 2028. Such delayed use of geoeconomic tools makes little sense – it does not hurt Russia, and the EU already has access to alternative LNG sources from the U.S. and elsewhere. The EU would not suffer, but neither would Russia.
If this measure is combined with Ukraine’s ongoing strikes on Russian refineries, extraction sites, and so-called “ghost tankers” – which have already caused a 15–20% drop in energy production – the impact becomes far greater. Not only economically, but also symbolically, as fuel shortages and long queues are now appearing within Russia itself. Ukraine has even targeted Bashkortostan – a region in Western Siberia – through which the only route for 3 million barrels of oil per day flows from Siberia to Western Russia, before being exported to Asia via tankers. Ukraine has also limited Russia’s export capacity, as the main export terminals – Primorsk and Ust-Luga – are now operating at half capacity due to these attacks. The final piece of the puzzle is U.S. pressure on India and Turkey to reduce their imports of Russian energy. India is already doing so.
In short, geoeconomic weapons do not operate in isolation from other geopolitical moves. Great powers understand this, and know which lever of power to pull at the right moment. So: EU – do not wait until 2028!
