The UK and Ukraine have signed a landmark agreement to allocate $3 billion from profits generated by frozen Russian assets toward strengthening Ukraine’s military and defence industry. The deal, announced by Ukraine’s Defence Ministry on May 27, is part of the G7’s broader Extraordinary Revenue Acceleration (ERA) initiative designed to support Kyiv amid its ongoing conflict with Russia.
Under the G7’s $50 billion ERA framework, Ukraine receives loans that are to be repaid using interest earned on approximately $300 billion in Russian sovereign assets frozen by Western nations since Russia’s full-scale invasion in 2022.
The UK has pledged to contribute £2.26 billion (roughly $3 billion) to Ukraine under the initiative, to be delivered in three equal installments. The first tranche of £752 million ($970 million) was disbursed on March 7.
Funds to Strengthen Ukraine’s Defence and Industry
According to the Ukrainian Defence Ministry, the funds will be used for a wide range of military and industrial purposes. These include purchasing foreign defence products, repairing and maintaining military equipment, and implementing joint projects between Ukrainian and international defence companies. The financing will also help acquire critical materials, including Ukrainian-made goods.
“Ukrainian enterprises have production capabilities valued at $35 billion, but a lack of funding has prevented their full utilisation,” said Deputy Strategic Industries Minister Davyd Aloian. “Access to profits from frozen Russian assets will significantly expand the production and repair potential of Ukraine’s defence sector.”
G7 Backs Plan to Turn Frozen Assets Into Long-Term Support
The G7’s ERA initiative, primarily backed by the United States and the European Union, represents a strategic attempt to transform seized Russian financial resources into sustained funding for Ukraine’s defence and eventual reconstruction.
While the legal debate over using the frozen principal remains ongoing, the current plan focuses on directing profits and accrued interest into immediate aid. The UK-Ukraine agreement is seen as a significant step forward in operationalising this mechanism and ensuring reliable support for Ukraine’s war effort.
