The European Union has agreed to use profits from frozen Russian central bank assets to financially support Ukraine, specifically in its defense efforts against Russia. This arrangement will allocate approximately 3 billion euros annually, sourced from the interest accrued on the roughly 210 billion euros of Russian assets predominantly held in Belgium. This agreement, facilitated by Belgium’s key role and requiring the cooperation of various member states including Hungary, will see 90% of these funds used for military equipment and the remaining 10% directed towards reconstruction and general aid.

This development comes as a result of intense negotiations among EU member states and is a response to Russia’s invasion of Ukraine. Notably, Hungary and a few other countries have shown hesitance in directly supplying weapons to Ukraine, leading to the inclusion of a non-military aid component in the package.

Euroclear, a company instrumental in managing these frozen assets, reportedly holds about 190 billion euros worth of Russian central bank assets. Significant revenue has been generated through this mechanism; specifically, Belgium has accrued approximately 1.6 billion euros in taxes from the profits realized by Euroclear since the start of the conflict.

The plan, endorsed by all 27 EU ambassadors, anticipates its first payment to Ukraine in July. While there were considerations regarding using a more substantial sum of Russian assets and alternative financial aid proposals by the US, the EU has focused on this immediate fiscal strategy to support Ukraine. Additionally, Belgium has suggested a potential future concession on its tax earnings from these profits starting from 2025, in coordination with EU and G7 partners. This deal also aligns with broader EU sanctions strategies, including proposed restrictions on Russian liquefied natural gas exports.

Final confirmation by EU member states is pending to initiate this aid mechanism.