EU moves €1.4bn, leaves Russia’s reserves frozen

The European Commission announced on 5 August that it transferred €1.4 billion in profits from frozen Russian central-bank assets to Ukraine (European Commission, Reuters). The profits are moving. The underlying reserves that produced them are not. That is why the money can flow, and why the instrument stays limited.

How frozen assets generate cash

When the EU froze Russian central-bank assets after the 2022 invasion, bond coupons and other payments kept arriving but could no longer be sent to Moscow. Those trapped cash flows piled up at central securities depositories (CSDs, the institutions that hold and settle securities), earning interest along the way.

In 2024, the Council (where EU governments negotiate and vote on legislation) ringfenced those post-freeze profits for Ukraine without touching the principal (EUR-Lex, The Brussels Times). The G7's shared position is that the reserves themselves should stay immobilised until Russia ends its aggression and pays for damage (G7 Apulia communiqué). This fifth transfer follows the same logic.

Loan repayment, not weapons

The headline invites readers to picture arms shipments. Almost all the money goes into a loan-repayment channel. The Commission says 95% helps Ukraine service EU and G7 loans under the €45 billion Extraordinary Revenue Acceleration plan. Only 5% flows through the European Peace Facility (EPF, the EU's off-budget instrument for military support) (European Commission, Euronews).

That split matters politically. Hungary has repeatedly blocked or delayed EPF disbursements. By routing nearly everything through the loan channel, the mechanism sidesteps that fight (Onet/Politico). But it also means this tranche mostly services debt. The actual military money, a separate €3.47 billion for drones, missiles and fighter jets, was released on 30 July under a different programme (European Commission).

Belgium absorbs the legal heat

The mechanism works as long as Russia's reserves stay frozen and generate income. Both conditions carry risk, and both concentrate in Belgium, where Euroclear holds the vast majority of immobilised assets.

A Moscow court has ordered Euroclear to pay roughly €200 billion to Russia's central bank. Euroclear says it will appeal. The ruling is unenforceable in Europe, but it hands Moscow a legal pretext for retaliating against Western assets still in Russia (Washington Post, The Brussels Times). Russian investors have separately filed arbitration claims against Belgium directly (21news, Le Monde).

Belgium's exposure sharpens a political divide inside the EU. Lithuania's foreign minister Kęstutis Budrys, after a Russian attack on Kyiv damaged the Lithuanian embassy, demanded Russian compensation and called for international damage-recording mechanisms (Delfi). Lithuanian MEP Petras Auštrevičius has called the profits-only approach a political failure (Friends of Europe). Polish media read the tranche as a useful minimum rather than a full answer (Rzeczpospolita). German coverage described it as routine interest income; Berlin has not publicly called for confiscating the principal (Spiegel).

The Commission says immobilised Russian assets have generated €8 billion in windfall profits in total. It has not published a single ledger showing how much was generated, transferred, committed and actually disbursed to Ukraine (European Commission). Governments are holding back from confiscating the reserves because they fear sovereign-immunity lawsuits, retaliation against Western corporate assets in Russia, and the risk that non-Western central banks rethink whether to park reserves in euro-area infrastructure. For now, the European Council (where heads of state set EU direction) is choosing the legally safer path: take the profits, leave the reserves, and let Belgium carry much of the legal exposure. No head of state has put their name to changing that.