Viktor Orbán holds up Ukraine arms funding from frozen Russian assets

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Viktor Orbán’s Hungary is holding up legislation that would enable Ukraine to receive up to €2bn for weapons from the EU, in a blow to efforts to mobilise profits from Russian assets frozen under sanctions.

After months of debate, EU countries this month agreed to use profits arising from about €190bn stuck in Belgian central securities depository Euroclear to buy weapons for Ukraine.

But Hungary’s envoy has objected to fast-tracking payments by forgoing a requirement for unanimous EU27 backing for each disbursement to Ukraine, said five people briefed on a meeting of EU ambassadors on Wednesday.

“For the time being they are blocking everything connected to the military support to Ukraine,” said one of the people, suggesting Budapest’s reservations would remain until at least next month’s European elections.

Orbán has long argued that the west cannot win the war in Ukraine, and Hungary has held up numerous European decisions relating to the conflict. But Budapest has ultimately relented under diplomatic pressure from the EU and Washington, including over a €50bn aid package to Kyiv.

To secure an agreement over using profits from frozen Russian assets, EU officials offered Hungary a deal whereby their share of the Brussels funds would not be used to purchase weapons for Ukraine, a second person said.

That convinced Budapest not to veto the scheme but it is holding up the implementation of the terms by failing to back the necessary legislation. Budapest is not opposed in principle but has concerns about making payments automatic, said people familiar with its thinking.

Diplomats are hopeful that a way can be found to untangle the issues before the payment is scheduled in July. Hungary declined to comment.

It came as G7 finance ministers discussed a separate US plan to issue a loan to Ukraine on the back of future profits arising from Russian assets. Ministers were hopeful an agreement on such a scheme could be reached at a G7 leaders summit in June, but some details are yet to be agreed.

“We are working to find a solution regarding future proceeds. We hope to lay the foundations here for a solution — perhaps at the G7 summit” in June, said Italy’s finance minister Giancarlo Giorgetti, who’s hosting the talks in Stresa, Italy.

Germany’s finance minister Christian Lindner said Berlin was examining the proposals and was “prepared to take further steps that would not have any legally disadvantageous or economically risky consequences”.

The US believes it has broad support for the loan idea, which could raise $50bn for Ukraine. But Washington acknowledges that European financial officials remain concerned about how the loan could be guaranteed, should Ukraine default or profits from Russian assets fail to materialise. 

“Those are really granular questions, not questions of intent or direction,” said a G7 official briefed on negotiations, while cautioning that “there’s still a lot of work to get through” before the leaders’ summit.

Any decision at G7 level on the use of future profits would require unanimous backing from EU27 countries — giving Hungary a further opportunity to frustrate efforts to further finance Ukraine.