UK to allocate US$3bn in profits from frozen Russian assets to strengthen Ukraine's defence

The UK Ministry of Defence, the Ukrainian Ministry of Defence and the Ministry of Strategic Industries of Ukraine have signed a project agreement on the use of windfall profits from frozen Russian assets under the Extraordinary Revenue Acceleration (ERA) initiative to arm and repair equipment for Ukraine.

"This funding has not only practical but also fundamental value. Surplus profits from Russian assets are being used to strengthen Ukraine's defence in response to aggression and in recognition of Ukraine's right to self-defence," said First Deputy Defence Minister Serhii Boiev.

According to the agreement, Ukraine will receive US$3 billion between 2025 and 2026. The funds will be used to purchase foreign-made defence products, repair and maintain military equipment, implement joint projects involving Ukrainian and international defence companies, and purchase other critical materials, including Ukrainian-made products.

"Ukrainian companies have a capacity of US$35 billion, but a lack of funds prevents them from being fully utilised. Therefore, attracting windfall profits from frozen Russian assets will significantly strengthen the production and repair capacities of the Ukrainian defence industry," said Davyd Aloian, Deputy Minister for Strategic Industries of Ukraine.

In 2024, the G7 agreed to jointly provide Ukraine with a loan of US$50 billion from Russian assets: the funds will be formally provided as a loan but will be repaid from the proceeds of frozen Russian assets.

In May, the European Commission disbursed the fourth tranche of macro-financial assistance to Ukraine in the amount of €1 billion under the G7 ERA initiative, which provides financial resources to Kyiv from the proceeds of frozen Russian assets.