The European Union will transfer the first $1.6 billion Russian asset profits into the aid fund for Ukraine.

The European Union announced on Friday (July 26) that they have allocated 1.5 billion euros (approximately 1.6 billion US dollars) to support Ukraine, marking the first transfer of funds from frozen Russian state assets.

In a social media post, Ursula von der Leyen, President of the European Commission, stated, “The EU stands with Ukraine. Today, we are redirecting 1.5 billion euros of frozen Russian assets to support Ukraine’s defense and reconstruction. The best use of the Kremlin’s money is in making Ukraine and all of Europe safer.”

According to an official statement released by the European Commission, the EU has provided the first payment of 1.5 billion euros from frozen Russian fixed assets to support Ukraine. Euroclear, a settlement company, made the initial payment on July 23, generated from special income held by the Central Securities Depository (CSD) of the EU arising from Russian sovereign assets.

The EU mentioned that these actions are a result of sanctions imposed on Russia following its aggressive war on Ukraine. They emphasized that the huge income from frozen Russian Central Bank assets does not belong to Russia but is held by the CSD, and is now being transferred to Ukraine.

Regarding the allocation of funds, 90% will be directed to a special fund called the “European Peace Facility,” which several EU countries have already used to reimburse Ukraine for weapons and ammunition. The remaining 10% will go into the “Ukraine Facility,” a financing institution for Ukraine. In cases where some countries oppose using their share for military purposes, the funds will support projects aimed at strengthening Ukraine’s national rebuilding initiatives.

The EU further highlighted that both funds will be distributed through the designated institutions and eventually all funds will be used for Ukraine. This will ensure that the revenue is managed under sound financial rules to enhance Ukraine’s military capabilities and national reconstruction.

Since Russia’s full-scale invasion of Ukraine, the EU along with the United States, Australia, and other G7 member countries have frozen around 260 billion euros of Russian state assets, over two-thirds of which are within the EU, held by the European Central Securities Depository in Brussels, generating about 3.9 billion euros in net profits since last year.

In May of this year, the EU’s 27 member states reached an agreement to utilize the profits from frozen Russian state assets for aiding Ukraine. Starting from mid-February 2024, the accumulated profits at Euroclear will be included within this initiative. The net profits until mid-February of that year will be retained as risk buffer fees.

The agreement stipulates that these funds will be transferred semi-annually to an EU fund. 90% of the funds will be used for procuring weapons and other military equipment for the Ukrainian army, with the remaining 10% allocated to reconstruction efforts.

Ukrainian President Zelensky is yet to comment on this news. On Saturday (27th), he praised the brave Ukrainian soldiers who are fiercely battling on the occupied territories.

Zelensky stated, “The occupiers must know that this is Ukrainian land. Every destroyed Russian airbase, every downed Russian military aircraft – whether on the ground or in the air – saves the lives of Ukrainians. I am thankful for our soldiers’ precise strikes.”

Recently, Russian forces have made incremental progress in attacks on eastern and northeastern Ukraine. Last week, Russian troops took control of two villages on the eastern front. The situation on the Ukrainian front line remains challenging.