Ukrainian soldiers await combat orders at their fighting position in the Donetsk Oblast on 25 July, 2024. Kyiv is expected to spend most of the EU’s loan on ammunition. Credit: Jose Colon / Getty.

Ukraine has received the first payment of €1.5bn ($1.6bn) taken from frozen Russian assets, the EU has announced today (26 July).

The payment marks the first step in the EU and G7’s wider plan to support Ukraine with a $50bn loan.

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Annual interest on this loan will be generated from $325bn of frozen assets in the Russian Central Bank, which the EU imposed sanctions against following Russia’s full-scale invasion of Ukraine in February 2022.

“The EU stands with Ukraine. Today we transfer €1.5 billion in proceeds from immobilised Russian assets to the defence and reconstruction of Ukraine,” said Ursula von der Leyen, President of the European Commission. “There is no better symbol or use for the Kremlin’s money than to make Ukraine and all of Europe a safer place to live.”

In the past 24 hours, Russia has launched a series of attacks on the northeastern Ukrainian city of Kharkiv and the surrounding area, killing three people and wounding at least six, local officials said. The office of a Swiss mine-clearing NGO was also damaged.

Moscow also launched drones on southern Ukraine from the occupied Crimean peninsula, wounding three people and damaging port infrastructure and residential buildings in the city of Izmail.

How will Ukraine’s military spend the funds?

The EU’s plan intends to bolster Ukraine’s military capabilities and finance its eventual reconstruction.

There is also speculation that the Ukrainian armed forces could use these funds to acquire ammunition amid shortages, which would feed into the European defence sector.

German prime Rheinmetall has announced it will build an ammunition factory in Ukraine, creating a direct production line. Oleksandr Kamyshin, Ukrainian Minister for Strategic Industries and Rheinmetall CEO Armin Papperger signed the agreement in June – weeks before reports emerged that Russia had planned to assassinate Papperger.

The UK has also announced a £2bn ($2.6bn) loan to Ukraine air defence systems and other equipment, following Ukrainian President Zelenskyy’s cabinet meeting in London last week.

UK officials will sit on a joint panel to decide what the funds are used for.