With the Russia-Ukraine war raging on for a fourth year, and peace talks still an afterthought, Ukrainian President Volodomyr Zelenskyy is running out of resources to continue resisting Russian President Putin's invasion.
“To wage war, you need first of all money; second, you need money, and third, you also need money” or so said Raimondo Montecuccoli, the revered field marshal and master of warfare for the Habsburg monarchy.
This was true in his time in the 1600s and holds true even in today’s ultra-capitalistic world.
To fight the fight, like Montecuccoli said, Ukraine needs funds. And her allies have found a rich source.
Finland said it will supply €90 million or just over $100 million worth of heavy ammunition to Ukraine, procured from domestic suppliers. But what’s interesting is how the European nation plans to finance the weapons aid.
According to its defence ministry, Finland plans to use Russian financial assets frozen by the European Union after Moscow's full-scale invasion in 2022.
The move is part of a broader European Union initiative to channel profits from immobilised Russian assets into support for Ukraine’s defense.
According to the Central Bank of Russia, western countries have frozen approximately $300 billion in Russian sovereign assets. Euroclear, a Belgian central securities depository, manages about 90% of frozen reserves in the EU. France holds much of the remainder with the US holding around $5 billion.
Finland reached an agreement with the European Commission to use these funds through the European Peace Facility. Defense Minister Antti Hakkanen praised the deal as it not only reinforces its support for Ukraine but also benefits its indigenous defence industry.
The European Union itself has pledged to allocate €1 billion, again from frozen Russian assets, to support Ukraine’s defense industry.
Kaja Kallas, the EU’s high representative for foreign affairs and security, declared that war-torn Ukraine had a legitimate claim for compensation and that Russian assets held in the EU were “a tool to pressure Russia”.
For context - In 2024, the World Bank estimated reconstruction and recovery would cost Ukraine $486 billion. Given the war is still raging, the number will only inch higher.
In a ploy similar to the EU, the United States has also supplemented their aid to Ukraine using frozen Russian assets.
In December 2024, outgoing US President Joe Biden had provided a $20 billion loan to be paid back with interest from frozen Russian assets. This was part of a $50 billion loan announced by the G7 group, with the balance amount being covered by the remaining members.
On an interesting side note - the US Treasury had transferred the amount to a World Bank fund, where it will be available for Ukraine to draw from. It is unclear how the funds would be used given that money handled by the World Bank cannot be used for military purposes.
Coming back, Biden had said that this decision must be seen as sending a message that Moscow is responsible for the damage it has caused as well as as an effort to relieve pressure on American taxpayers. The latter point is most crucial, let me explain why.
Since Russia’s invasion in 2022, Ukraine has become the top recipient of US foreign aid. US Congress has passed five major bills aiding Ukraine, which together amount to $175 billion in spending.
But the change of guard in Jan 2025 saw US commitment called into question. Almost immediately after being sworn in as President, Donald Trump froze all military aid to Ukraine but then lifted the freeze shortly after, following cease-fire talks in Saudi Arabia. Kallas implored the need to continue supporting Ukraine, because she’s “worried about what happens if Russia wins” believing it will lead to “more wars, bigger wars”.
Beyond defence aid, some world leaders believe the frozen assets can be used strategically too.
French President Emmanuel Macron said they should be “part of the negotiation at the end of the war”. Thus opening up the notion of using the assets as a bargaining chip, or as a security guarantee for Ukraine after a peace deal.
But as expected, the Kremlin has said that any move to seize or sell off frozen Russian assets would be illegal, contravene property rights, set a dangerous precedent, and would be challenged in court.
