The fate of the proceeds from assets frozen in the wake of Russia’s invasion of Ukraine in February 2022 had already been decided by the EU in May, with 90% allocated to military aid. However, diplomats told international news wire Reuters that Hungary had been holding up approval of the necessary legal measures. Now, the EU seems to have devised a legal workaround to sidestep Hungary’s objections. 

At the meeting of foreign ministers, EU chief diplomat Josep Borrell explained that the usual unanimity for foreign policy decisions was not required in this instance. Because Hungary had 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 said. “We will now speed up without having this blockage,” Borrell told reporters after the meeting.

This procedure could also set a precedent, potentially enabling G7 leaders to raise a USD 50 bln loan for Ukraine by December, designed to be paid off by future proceeds from the sale of the frozen assets.

Although concerns from the United States and other G7 partners about potential obstruction on the part of Hungary had caused significant delays in the negotiation of the loan since the decision was made at a summit in Italy earlier this month, the legal workaround for the EU use of proceeds seems likely to suffice in guaranteeing the payout of the loan.

Although Minister of Foreign Affairs and Trade Péter Szijjártó listened without objection to Borrell, who at one point told the Hungarian representative, “We are going to do this without you,” according to diplomats present, Szijjártó later expressed his outrage with the method in a post on his Facebook page.

Disregarding Hungary

“That EUR 1.4 bln is practically revenue from seized or frozen Russian assets, and as Hungary abstained from the first such vote on their use, the council’s legal service, Brussels, the bureaucrats and some member states thought that was a sufficient basis to disregard Hungary’s decision-making right and ignore its position on the matter,” Szijjártó said. “That’s clearly a red line.”

Adding that the EU wanted to continue to “cross red lines” with a proposal to train Ukrainian soldiers in the territory of Ukraine, in addition to other countries, Szijjártó said, “That is unacceptable for us, and we will protest it with all available means.”

Yet, as Hungary takes over the EU’s rotating presidency from July 1, EU countries are considering more ways to insulate the bloc’s decisions from Budapest’s persistent obstruction, which has blocked or delayed a record number of foreign and security policy issues in recent months. Hungary is currently holding up seven decisions related to Ukraine worth EUR 6.6 bln, partially as a way to finagle access to EU funds frozen over rule-of-law concerns.

“It’s got to the point where nothing happens without thinking about how they could ruin it,” a senior EU diplomat involved in negotiations with Budapest told the Financial Times. “We’re at a moment when it’s either give up on ambitions or think creatively to cut them out.”

Such creative propositions run the gamut from amending EU treaty provisions to more passive-aggressive tactics. Some proposed amendments include allowing some decisions to be made by a qualified majority instead of by unanimity or requiring further justification from countries if they exercise their vetoes.

Others have suggested boycotting ministerial meetings held in Hungary or issuing confidential annexes to EU documents that outline alternative means of reaching an agreement among other consensus-holders. Others are still openly considering advancing an Article 7 procedure against Hungary, revoking the country’s voting rights.

This article was first published in the Budapest Business Journal print issue of June 28, 2024.