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.
In Moscow, the agreement was dismissed as an ineffective plan that would ultimately harm the European Union even more.
“The purpose of the sanctions was to strangle the Russian economy and destroy the cohesion of society,” Deputy Foreign Minister Alexander Grushko said in Moscow.
“The EU has achieved the opposite,” he said. Russia also warned of a new increase in energy prices in the EU.
Approval of the plan is seen as an important boost for Ukraine
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.
EU measures target sanctions evaders
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 Russian armaments company Vysokotochnye Kompleksy (High Precision Systems) announced that the sanctions against its companies, including a tank factory, were a sign of recognition that the military complex was functioning successfully. The sanctions would have no impact on arms production in the future, the report said.
Russian LNG first focusing on EU sanctions
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 analysts spoke of a blow to LNG producers. However, the sanctions were relatively mild and there was a transition period during which Russian companies could find new customers and alternative routes, as was the case with the oil embargo, they said.
India and China – and the Asian region as a whole – were already benefiting from relatively favorable energy offers from Russia, a major commodity power, they said.
