New EU investment fund for frozen Russian assets: Why it matters

On June 19, 2025, it became known that the European executive is considering transferring almost €200 billion of frozen Russian state assets held at Euroclear into a new, riskier investment fund that would pay out higher interest.

The Institute of Legislative Ideas supports this initiative as an important step in strengthening support for Ukraine. 

Why is this important for Ukraine?

1. Preserving funding for current needs

This initiative is particularly important as a significant portion of the EU’s €50 billion financial package for Ukraine, which was agreed in 2023 and was set to last until the end of 2027, has already been spent. 

In addition, last year, G7 leaders reached a consensus on how to deliver approximately $50 billion in ERA loans to Ukraine. Despite the transfer of part of the funds, it is unclear when Ukraine will receive the full amount of the loan. At the same time, European authorities report that the repayment term for this loan will reach 45 years by extraordinary profits from immobilized Russian assets. However, this also means that without additional sources of funding, Ukraine may face financing problems in the coming years.

At the same time, the mechanism under discussion is an important potential source of funding, and the accumulated funds should either be directly allocated to support Ukraine or become another loan similar to the ERA loan.

2. Increasing financial flows

Currently, €183 billion held at Euroclear sit in low-yield accounts. In 2024, the windfall profits generated by such investments amounted to €4 billion. However, Euroclear charges a management fee of 3% and retains a 10% share of the windfall contribution to comply with capital and risk management requirements, without transparent disclosure of the specific conditions for such retention.

Through riskier investments, Ukraine could receive significantly more funds, which is critically important for economic recovery and maintaining the country’s defense capabilities.

Why does the EU need this?

1. Protecting the interests of European taxpayers

Funds will come not from member state budgets, but from interest on frozen Russian assets. Ukraine will receive critically needed funds for recovery and support without burdening taxpayers in other countries. This allows the EU to continue supporting Ukraine even amid strained national budgets and competition between external commitments and domestic priorities.

2. Reducing dependence on Hungarian veto

If the legal basis of the fund is based not on the sanctions regime, but on a financial asset management scheme, this could remove it from the traditional sanctions renewal process, where unanimous voting is required, which Hungary periodically blocks.

 3. Institutional flexibility

The shift from conservative Euroclear management to a more active investment approach represents a change in asset management strategy rather than asset seizure. The transfer of interest and profits is already possible under the existing Council Regulation (EU) 2024/576, which establishes that

“Unexpected and extraordinary revenues covered by this Regulation do not have to be made available to the Central Bank of Russia under applicable rules, even after the discontinuation of the transaction prohibition. Thus, they do not constitute sovereign assets. Therefore, the rules protecting sovereign assets are not applicable to these revenues”.

This creates a solid legal basis for using profits from Russian assets without violating international law regarding sovereign immunity.

This initiative demonstrates the European Union’s readiness to seek creative solutions for long-term support of Ukraine, using the aggressor’s funds to restore the victim of aggression. Such an approach is not only morally just but also economically sound, as it provides a stable source of funding without additional burden on European taxpayers.

Successful implementation of this mechanism could become an important precedent for international law and serve as an example for other partner countries.