EU Overrides Orban to Fund Ukraine with Frozen Russian Assets

The European Union has taken decisive action to bypass the veto power of Hungary’s Prime Minister Viktor Orban, enabling a plan to use frozen Russian assets to fund a loan for Ukraine. This move is a significant step in an ongoing effort to support Ukraine amidst its ongoing conflict with Russia.

EU member states have agreed to utilize emergency powers, altering the approval process for sanctions against Russia. Under this new framework, a substantial majority of member states will be sufficient for sanctions to be renewed, rather than requiring unanimous consent from all 27 countries. This decision was made following persistent tensions between Hungary and other EU nations regarding Orban’s previous threats to block sanctions aimed at crippling Russia’s capacity to finance its war in Ukraine.

The new sanctions framework is crucial to a contentious plan to utilize €200 billion of Russian state assets that are currently frozen in Europe. This proposal aims to finance a €90 billion loan to bolster Ukraine’s military and economic efforts. A diplomat from an EU country remarked, “I think it’s good that we found a legal way to stop the six-monthly kerfuffle,” highlighting the frustration with the previous veto process.

These assets were immobilized following the EU’s sanctions imposed after Russia’s full-scale invasion of Ukraine in 2022. The proposal has faced backlash from Moscow, which has threatened legal action against the Belgian securities depository, Euroclear, where these assets are held. The Russian central bank is seeking damages over the freezing of its funds, according to reports from the Financial Times.

Despite the EU’s plans, the Belgian government remains hesitant about supporting the loan. Officials are concerned about potential retaliation from Russia, as well as possible legal challenges. Further negotiations are ongoing, with an important decision expected at an upcoming summit of EU leaders in Brussels.

While this financial support could shore up Ukraine’s finances for at least two years, the proposal has met resistance from leaders like Slovakia’s Prime Minister Robert Fico. He opposes any initiative that would cover Ukraine’s military expenses, asserting that using frozen Russian assets could “directly jeopardise” ongoing US-led efforts for peace negotiations.

The EU’s new approach to sanctions has drawn criticism from Orban, who labeled it an “unlawful” circumvention of the requirement for unanimous foreign policy decisions. The implementation of the loan plan hinges on achieving consensus among a large majority of EU leaders, with Belgium’s approval remaining a critical factor.

Discussions are also underway concerning Ukraine’s potential accession to the EU, with suggestions that it could join by January 1, 2027. However, many diplomats express skepticism regarding the feasibility of this timeline, citing the complexities typically involved in EU enlargement processes.

As the situation develops, EU leaders are keenly aware of the urgent need to provide Ukraine with the necessary financial backing to sustain its efforts in the ongoing conflict with Russia. The outcome of these negotiations will not only impact Ukraine but also have broader implications for EU-Russia relations and the geopolitical landscape in Europe.