Key Takeaways
- The British government has ruled out using £8bn in frozen Russian assets to aid Ukraine, following the collapse of a similar EU proposal.
- The EU has agreed to lend €90bn to Ukraine, borrowed against the bloc’s shared budget, after its proposal to use immobilised Russian sovereign assets collapsed.
- The UK will "reprofile" $2bn of guarantees for World Bank lending to support Ukraine’s immediate financing needs.
- The UK has a separate commitment to provide £3bn a year in military support to Ukraine.
- Ministers are working on alternative financing options for Ukraine, including a £2.3bn loan backed by profits from Russian sovereign assets subjected to sanctions.
Introduction to the Situation
The British government has decided not to use frozen Russian assets held by UK banks to aid Ukraine, following the collapse of a similar proposal by the European Union. The EU had proposed using €210bn of cash belonging to Russia to back a loan for Ukraine, but the plan foundered due to disagreements over guarantees to cover any financial risk. Instead, the EU has agreed to lend €90bn to Ukraine, borrowed against the bloc’s shared budget, to fund the country for the next two years.
The UK’s Decision
The UK’s decision not to use frozen Russian assets to aid Ukraine is a significant development, as Prime Minister Sir Keir Starmer had been a proponent of the idea. However, British officials have stated that the UK will not move unilaterally and will only take action in lockstep with international partners, including Australia, Canada, and the EU. The UK will instead "reprofile" $2bn of guarantees for World Bank lending to support Ukraine’s immediate financing needs. The UK has also committed to providing £3bn a year in military support to Ukraine.
The EU’s Proposal
The EU’s proposal to use frozen Russian assets to aid Ukraine was met with resistance from some member states, including Belgium, which demanded expansive guarantees to cover any financial risk. The plan ultimately collapsed, and the EU agreed to lend €90bn to Ukraine, borrowed against the bloc’s shared budget. The loan will be used to fund Ukraine for the next two years, and Kyiv will only have to pay back the loan after Russia has paid reparations. Russia’s assets will remain immobilised and could ultimately be used to repay the loan if Moscow does not agree to pay reparations.
Alternative Financing Options
The UK is working on alternative financing options for Ukraine, including a £2.3bn loan backed by profits from Russian sovereign assets subjected to sanctions. The loan was pledged in March, and the UK is also exploring other options to support Ukraine’s financing needs. The UK’s chancellor, Rachel Reeves, has stated that the UK will work "urgently" with partners to ensure Kyiv receives necessary funding, and that the UK’s support for Ukraine remains "ironclad".
The Case of Roman Abramovich
The UK government has also been involved in a high-profile case involving Roman Abramovich, the former owner of Chelsea Football Club. Abramovich was granted permission to sell the club under the condition that neither he nor his connections benefited from the sale. The proceeds of the sale, which total £2.5bn, have remained frozen in a UK bank account. The UK government has issued a licence to transfer the funds to Ukraine, and has warned Abramovich that it is prepared to take him to court if he fails to release the funds.
Conclusion
The situation in Ukraine remains critical, with the country facing collapse in early 2026 without additional support. The EU’s decision to lend €90bn to Ukraine is a significant development, and the UK’s commitment to providing £3bn a year in military support is a welcome boost. However, the UK’s decision not to use frozen Russian assets to aid Ukraine is a setback, and the country will need to explore alternative financing options to support its defence efforts. The case of Roman Abramovich highlights the complexities of dealing with frozen assets, and the need for careful consideration of the legal and financial implications of using such assets to support Ukraine.