In a significant decision made on Wednesday, May 8, European Union (EU) member states have reached a landmark agreement to allocate billions of euros from frozen Russian central bank assets to strengthen Ukraine's defense capabilities and aid in its post-war reconstruction. This move comes in response to Moscow's recent battlefield gains, where it has utilized its manpower and weapons advantage, while Kyiv awaited critical Western aid.

With the United States finally prepared to deliver a long-delayed aid package, the pressure on the EU to increase its support for Ukraine has mounted. In March, the leaders of the 27-nation bloc had already agreed in principle to utilize the frozen assets, which are expected to release approximately €3 billion ($3.3 billion) annually.

The Belgian presidency of the Council of the EU announced the agreement, stating that EU ambassadors "agreed in principle on measures concerning extraordinary revenues stemming from Russia's immobilized assets." These funds will be utilized to support Ukraine's recovery and military defense in the face of Russian aggression. The first tranche of funds is expected to be released in July.

EU Commission chief Ursula von der Leyen highlighted the significance of this decision, declaring that "There could be no stronger symbol and no greater use for that money than to make Ukraine and all of Europe a safer place to live."

The frozen Russian assets held in the EU, amounting to approximately €200 billion, were frozen as part of punishing sanctions imposed on Moscow following its invasion of Ukraine in February 2022. However, directly confiscating and giving this money to Ukraine was deemed impractical due to concerns about potential disruptions to international markets and euro stability.

Instead, EU leaders settled on a plan to target the interest being paid on the frozen assets. Under the agreement - subject to formal approval by EU ministers - 90 percent of the interest will be allocated to the European Peace Facility, a central fund used to purchase weapons for Ukraine. The remaining 10 percent will go to the EU's separate Ukraine Facility.

Additionally, Belgium has agreed to transfer the entirety of the tax revenues generated from the frozen assets since the start of the war, amounting to an extra €1.7 billion for Ukraine in 2024. To expedite the process, Euroclear, the international deposit organization based in Belgium, has significantly reduced its fees for handling the frozen assets.

While the EU has taken significant steps to support Ukraine, it has yet to fulfill its promise made last year regarding the supply of a million artillery shells by this month. However, the EU has proposed measures to hasten support, including expanding lending to militarily useful technologies, which was formally approved by the board of the European Investment Bank on Wednesday.

Estonia's foreign minister, Margus Tsahkna, leading the efforts to escalate support, referred to Wednesday's agreement as a "first step" toward utilizing the complete amount of frozen Russian assets. Meanwhile, the United States has recently approved a substantial $61 billion aid package for Ukraine, with plans to confiscate and sell Russian assets to finance Ukraine's reconstruction. This approach is gaining traction among other G7 countries.

Overall, an estimated $397 billion of Russian assets have been frozen by the West, including three-quarters in central bank assets, along with yachts, real estate, and other properties owned by individuals close to President Vladimir Putin.