EU devises legal loophole to bypass Hungary veto on support for Ukraine

The EU has devised a legal workaround to sidestep Hungary’s veto on buying weapons for Ukraine with the profits generated by Russia’s frozen assets this year, in a move that could also clear the way for the G7 to pay $50bn to Kyiv.

EU chief diplomat Josep Borrell told the Financial Times that since Hungary abstained from an earlier agreement to set aside the proceeds from Russia’s frozen assets, it “should not be part of the decision to use this money”.

He added that the workaround, which on Monday released up to €1.4bn to purchase military equipment for Kyiv, was “as sophisticated as every legal decision, but it flies”.

Bypassing Budapest this way could also remove a hurdle that could complicate G7 efforts to raise a $50bn loan for Kyiv by December — designed to be paid off by the future proceeds — a decision taken by leaders at a summit in Italy earlier this month.

Assets worth about €210bn are immobilised in the EU, the bulk of which is in Belgium — and the bloc earlier this year agreed to use the profits generated as of February to buy arms for Ukraine.

Hungary, the EU’s most pro-Russian member state, has long argued against the 27-country bloc collectively providing military support to Ukraine. Budapest is also blocking seven other decisions related to arming Kyiv, worth about €6.6bn.

The legal workaround was not challenged by EU foreign ministers at a meeting in Luxembourg on Monday. It could also be crucial for the G7 deal to work and for the $50bn loan to be issued by the end of the year. Under the G7 plan, the profits generated by Russia’s frozen assets from next year will be spent on paying off the loan.

Hungary’s foreign minister Péter Szijjártó did not strongly object when the details of the legal workaround were presented at the meeting, according to two people briefed on the private discussions.

That has raised hopes among other ministers that Budapest would not consider its own legal options to block it, the people added.

But some capitals are concerned about the legal basis used for the loophole, officials said, and the potential precedent it could set for other issues where Brussels could circumvent potential vetoes.

Szijjártó told reporters on Monday: “The pro-war hysteria continues . . . Many governments are preparing for a long war, and the commandments ‘we must act faster for Ukraine, we must do more for Ukraine’ have been constant.” 

On blocking seven other decisions related to arming Kyiv, worth about €6.6bn, he said: “Instead of arms shipments, we are advocating a ceasefire.”

Concerns from the US and other G7 partners over Hungary likely blocking an EU decision to keep the Russian assets immobilised indefinitely caused significant delays in the negotiation over the $50bn loan. The legal workaround for the EU use of proceeds is likely to suffice in guaranteeing the payout of the loan, according to officials familiar with the matter.

However, Hungary could still block EU sanctions under which Russian assets are blocked, a decision that needs to be renewed unanimously every six months by the EU’s 27 countries, officials said.

Borrell said Brussels had offered Hungary a similar deal to the one Nato struck with Prime Minister Viktor Orbán last week — giving Budapest an opt-out from activities supporting Ukraine in exchange for not vetoing other allies assisting Kyiv under the alliance umbrella — but it had been rejected.

“We have offered Hungary: your money will not be used to support Ukraine in any means. Not just lethal, but on anything. Take your money. Put your money out of the box. I don’t want to use your money,” Borrell said.

But Hungary had said no, he added.

“Even if they are offered not to be part of team, and their money will not be used for Ukraine . . . it has not been enough.” The chief diplomat said Budapest’s position “has something to do with the strong links that they have with Russia”.

A spokesperson for the Hungarian government declined to comment.