EU foreign ministers approved €1.4 billion ($1.5 billion) in military aid to Ukraine, with the package being financed for the first time by revenues from frozen assets of the Russian Central Bank, announced the EU’s top diplomat Josep Borrell on Monday.
In Moscow, the agreement was rejected as an ineffective plan that would end up further harming the European Union.
“The aim of the sanctions was to strangle the Russian economy and destroy the cohesion of society,” said Deputy Foreign Minister Alexander Grushko in Moscow.
“The EU has achieved the opposite,” he said. Russia also warned of a further rise in energy prices in the EU.
Approval of the plan seen as a fundamental boost for Ukraine
The approval comes as a welcome boost for Kiev, amid Hungary’s continued opposition to other packages from an extra-budgetary fund called the European Peace Mechanism (EPF), worth more than 6 billion euros.
Each EU Member State has the right to veto EPF payments and Hungary has been blocking some Ukraine-related disbursements for almost a year. A support fund of 5 billion euros is also blocked.
EU diplomats did not expect a solution to the EPF standoff with Hungary. As a result, Ukraine’s military aid from revenue is a useful alternative means of support.
Borrell referred to this blockade of Hungary as a “structural difficulty” at a press conference following the EU foreign ministers’ meeting in Luxembourg.
Careful legal work to enable help
EU member states first gave their approval to use 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 noted that because Hungary abstained from the decision to use frozen assets for Ukraine, and that the new aid comes from Russian Central Bank assets rather than EU funds, the Budapest veto does not apply.
Borrell said that due to Hungary’s absence, it was “not necessary” to involve Budapest in implementing the decision.
Hungarian Foreign Minister Péter Szijjártó criticized the move as a violation of EU rules, according to Hungarian government spokesman Zoltan Kovacs on X.
Hungary opposes military aid to Ukraine fearing an escalation of the conflict with Russia and expresses doubts about Western support for Ukraine, preferring instead to call for a ceasefire.
However, Hungarian Prime Minister Viktor Orbán has already linked decisions on aid to Ukraine to the release of EU funds for Hungary, which were frozen due to rule of law concerns.
Military and financial aid to Ukraine
Military aid to Ukraine uses interest and other profits from assets, but not the underlying assets themselves, which will remain frozen.
A total of 90% of the money will finance military aid, while 10% will go directly to Ukraine as financial aid.
Under the terms of the deal, Germany and the Czech Republic were selected as the first to use resources to supply Ukraine with air defense equipment and artillery shells, EU diplomats said.
Other EU member states will be able to administer the proceeds in the future.
According to the European Commission, around 210 billion euros in Russian Central Bank assets are frozen in the European Union.
Brussels-based financial institution Euroclear, which holds the majority of the assets, recently announced that the assets will earn around €4.4 billion in interest in 2023.
EU measures target those who avoid sanctions
EU foreign ministers also adopted new punitive measures to crack down on sanctions evasion and prevent Russia from obtaining Western weapons technology.
Another 69 individuals and 47 entities linked to the Russian invasion of Ukraine were sanctioned with asset freezes and travel bans to the EU.
EU sanctions also targeted organizations that provide services or goods used by the Russian military based in China, Turkey and India. Goods that can be repurposed for military uses cannot be sold to these EU sanctioned companies.
Russian arms holding Vysokotochnye Kompleksy (High Precision Systems) announced that sanctions against its companies, including a tank factory, were a sign of recognition that the military complex was operating successfully. The sanctions would not impact weapons production in the future, he said.
Russian LNG target of EU sanctions first
The new salvo of sanctions targets Russia’s multibillion-dollar liquefied natural gas (LNG) sector for the first time.
These punitive measures prohibit ports such as Zeebrugge, Belgium, from transporting 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 comparatively mild and there was a transition period that would allow Russian companies to 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 comparatively favorable energy offers from Russia, a major raw materials power, they said.
