The EU has opted against transferring €5bn to Ukraine from the proceeds derived from frozen assets of the Russian Federation, a decision likely to stoke controversy amidst heightened tensions between the EU and Russia.

The funds, accrued from investments of frozen Russian assets in the EU between 2022 and 2023, will remain in Euroclear, the entity responsible for holding a significant portion of the Russian Federation's assets in the EU, according to recent reports.

The European Commission had previously proposed allocating 90% of the revenues generated from Russia's frozen assets in Europe towards the purchase of weapons for Ukraine, albeit with a caveat. Only funds received after February 15, 2024, the agreed-upon date for EU countries to initiate transfers to Ukraine, were to have been included in the proposal.

However, the European Commission has now decided to retain €5bn as a buffer to cover current and potential lawsuits against the Russian Federation in various jurisdictions, a move aimed at safeguarding against legal liabilities.

Justice Minister Denys Malyuska acknowledged that the allocated amount exceeds the anticipated costs of any potential litigation. Legal experts concur that retroactively seizing profits could present legal complexities, underscoring the intricacies surrounding the EC's decision.

The decision not to transfer the earmarked €5bn to Ukraine is expected to draw criticism, particularly from Ukrainian officials and proponents of bolstering Ukraine's defence capabilities amidst the ongoing war with Russia.