Ukraine’s overall funding gaps ,the Impact of Funding Self-Defence
The transfer of “windfall profits” generated by frozen Russian assets is providing direct and critical support to Ukraine, largely focusing on immediate military needs and defense industrial capacity. While the total amount is modest compared to
Ukraine’s overall funding gap, its impact is highly targeted and strategic.
The estimated annual windfall profits being channeled to Ukraine are around €3 billion per year. As of late 2025, the EU has already made several tranches of transfers.
Here is a breakdown of the practical military and financial impact:
The most significant use of the windfall profits has been the direct funding of military equipment procurement. This is achieved primarily through the European Peace Facility (EPF), which acts as a vehicle for member states to pool resources to fund military aid.
1. Prioritizing Immediate Defense Needs
Targeted Procurement:
Around 90% of the initial transfers and subsequent allocations are being directed through the EPF. This money is being used to procure urgent, high-value assets that directly influence battlefield dynamics.
Air Defense and Counter-Drone:
A critical portion of the funds is dedicated to strengthening Ukraine’s air defense. For instance, reports indicate that some EU member states are using these profits to finance the acquisition of advanced, self-propelled anti-aircraft systems, such as the Skyranger 35, designed specifically to counter Russia’s extensive use of drones and cruise missiles.
Ammunition:
A major portion of the funds is allocated to procuring artillery ammunition—a persistent and massive need for Ukraine on the front lines.
2. Boosting Ukraine’s Defense Industry
A newer, strategic use of the funds is the direct investment in Ukraine’s own defense-industrial base.
Made in Ukraine”:
By directing windfall profits to the procurement of equipment from Ukrainian manufacturers, the EU is not just providing aid;
it is investing in Ukraine’s long-term self-sufficiency. This supports local jobs, develops indigenous technological capacity, and makes the country less reliant on the volatile delivery schedules of foreign aid.
Specific Contracts:
Funds are being used to support the production of domestic items, including drones, armored vehicles, and shells, strengthening the resilience of Ukraine’s war economy.
Financial and Budgetary Impact
The remaining portion of the funds (around 5% to 10%) is channeled through the EU’s Ukraine Facility and other EU programs, which focus on state stability and recovery.
Budgetary Stability:
While the primary focus is military, the funds indirectly help ease the pressure on Ukraine’s state budget by covering a portion of its non-military financial gap.
Ukraine requires massive external financing (estimated at around $60 billion annually) just to cover essential non-military spending, such as salaries, pensions, and basic governance.
Foundations for Reconstruction:
Funds directed to the Ukraine Facility are earmarked for recovery and reform, setting the groundwork for Ukraine’s eventual application for EU accession.
This includes projects related to restoring critical infrastructure, reforming key sectors, and strengthening governance, all of which are essential for long-term stability.
Minimal Debt Burden:
Importantly, because these transfers are classified as grants (money given outright, not loans), they do not increase Ukraine’s already massive public debt burden, which is a critical concern for its post-war economic health.
The money is strategically used to maximize impact at the point of conflict while upholding the legal integrity of the frozen principal assets.
