EU foreign ministers have approved 1.4 billion euros in military aid to Ukraine, with the package financed for the first time with proceeds from frozen assets of the Russian Central Bank, EU diplomat Josep Borrell announced on Monday.
The approval comes as a welcome boost for Kiev amid Hungary’s continued opposition to other packages from an off-budget fund, the European Peace Facility (EPF), worth more than 6 billion euros.
Every EU member state has a veto on EPF payments and Hungary has been blocking a number of Ukraine-related payments for almost a year. A support fund of €5 billion is also blocked.
EU diplomats had not expected a breakthrough in the EPF standoff with Hungary. As a result, Ukraine’s military aid from the proceeds is a useful alternative means of support.
Borrell called this blockade from Hungary a “structural difficulty” during a press conference after the meeting of EU foreign ministers in Luxembourg.
Careful legal footwork to enable relief
EU member states first authorized the use of the proceeds to buy weapons for Ukraine in May, but it was unclear when the first payments would be made due to Hungary’s veto.
A legal analysis showed that since Hungary abstained from voting on the decision to use the frozen assets for Ukraine, and that the new aid comes from the assets of the Russian Central Bank, and not from EU funds, the veto of Budapest does not apply.
Borrell said that due to Hungary’s absence there is “no need” to involve Budapest in implementing the decision.
Hungarian Foreign Minister Péter Szijjártó labeled the measure as a violation of EU rules, Hungarian government spokesman Zoltan Kovacs said on X.
Hungary opposes military aid to Ukraine for fear of an escalation of the conflict with Russia and expresses doubts about Western support for Ukraine, preferring instead to call for a ceasefire.
Hungarian Prime Minister Viktor Orbán has previously linked decisions on aid to Ukraine to the release of EU funds for Hungary, which had been frozen over rule of law concerns.
Military and financial aid for Ukraine
Military aid to Ukraine uses interest and other profits from the assets, but not the underlying assets themselves, which will remain frozen.
In total, 90% of the money will finance military aid, while 10% will go directly to Ukraine as financial aid.
Under the agreement, Germany and the Czech Republic have been selected as the first to use the proceeds to supply Ukraine with air defense equipment and artillery shells, EU diplomats said.
Other EU Member States may be able to manage the proceeds in the future.
According to the European Commission, approximately €210 billion worth of assets belonging to the Russian Central Bank have been frozen in the European Union.
Brussels-based financial institution Euroclear, which holds the lion’s share of the assets, recently announced that the assets had earned around 4.4 billion euros in interest by 2023.
Russian LNG was the first to target the EU sanctions
EU foreign ministers also adopted new punitive measures to crack down on sanctions evasion and prevent Russia from acquiring Western technology to make weapons.
Another 69 individuals and 47 entities involved in Russia’s invasion of Ukraine have been sanctioned with an asset freeze and a travel ban to the EU.
The EU sanctions also targeted organizations that provided services or goods used by the Russian military in China, Turkey and India. Goods that may be repurposed for military use may not be sold to these sanctioned EU companies.
The new salvo of sanctions is the first to target Russia’s multibillion-dollar liquefied natural gas (LNG) sector.
These punitive measures ban ports such as Zeebrugge in Belgium from shipping Russian LNG to countries outside the EU after a nine-month transition period.
Russian President Vladimir Putin’s so-called “shadow fleet”, which is used to circumvent sanctions, is also being targeted. This includes 27 specific ships.
Another target was the Financial Messaging System of the Central Bank of Russia (SPFS). EU banks should be banned from using the service, which the bloc sees as a Russian initiative to avoid sanctions.
The media, non-governmental organizations (NGOs) and political parties should be prohibited from accepting funding from the Russian state or other proxies.
German opposition to the 14th sanctions package had to be overcome, EU diplomats said, because Berlin was concerned the package went too far, especially on subsidiaries.
EU diplomats said a compromise had been reached, meaning measures halting exports to Russia – the so-called “No Russia” clause – will not apply to subsidiaries for the time being. The issue needs to be reconsidered.
