“Iranization” describes a country that is stuck with limited modernization, long-term stagnation, and a deepening dependence on China. It’s the first major Western institutional attempt to define Russia’s trajectory as structurally comparable to Iran’s decades-long isolation.

Russia’s reserves are depleting and deficits mounting through October. Moscow retains the capacity to sustain its invasion through 2026, but the economic model is collapsing into stagflation.

What “Iranization” means

The French Institute of International Relations (IFRI) report, “Europe-Russia: Balance of Power Review,” supervised by nine European think tank directors, defines the term precisely.

Like Iran after decades of sanctions, Russia faces structural isolation from Western markets, financial systems, and technology transfers.

June predictions, October reality

IFRI’s mid-year assessment saw trouble coming. Russia’s economic momentum had peaked by year-end 2024 and was drifting into stagflation. The warning signs included rising inflation, a projected budget deficit of 2.6% in 2025, and the National Wealth Fund’s liquid portion shrinking to $31.5 billion by June 2025.

Russia’s budget deficit hit 4.2 trillion rubles ($48.2 billion) in the first eight months of 2025—four times higher than the previous year, per Russian Finance Ministry data. The National Wealth Fund now stands at roughly $40 billion, continuing its decline despite a modest uptick from June.

Russia entered stagflation exactly when IFRI predicted, with deterioration accelerating through autumn.

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The €160 billion gas reckoning

Russia’s isolation shows most starkly in the energy. IFRI calculates Russia’s gas sector won’t recover from losing the European market—€160 ($185) billion in lost Gazprom export revenue over 2025-2030.

Yet, as IFRI points out, Europe absorbed the shock. Fossil-fuel import bills halved compared to 2022 levels—over €250 ($288) billion in annual savings for European countries.

The IFRI report notes Europe has implemented an unprecedented industrial policy shift, strengthening resilience and competitiveness while positioning itself to become the world’s most electrified economy and global climate leader by 2030.

War capacity persists

The critical caveat: Russia’s ability to sustain the war effort isn’t exhausted, particularly if oil prices remain stable. Lower oil prices or additional strict sanctions would create precarious conditions, but Moscow retains operational capacity for now.

The IFRI assessment notes that while Russia retains war-fighting capacity, Europe holds clear advantages in air, naval, space, and cyber domains. Russia dominates only land warfare through mass and firepower, plus nuclear intimidation, but cannot project power across all domains at once. Outside Ukraine’s ground war, the military balance remains decisively in Europe’s favor.

Nine European think tank directors supervised this assessment—the first formal Western research framework to treat Russia’s trajectory as permanent structural isolation rather than a recoverable disruption. European planners aren’t asking whether Russia’s economy will recover after the war ends. They’re analyzing how Moscow will function as a sanctioned, isolated state dependent on China for survival, mirroring Tehran’s trajectory over four decades.

Russia’s Black Sea port of Tuapse has suspended fuel exports and halted crude oil processing following a Ukrainian drone strike, forcing three tankers to anchor offshore empty while a 3.6-kilometer (2.2-mile) oil slick spreads into the sea.

The Tuapse oil refinery suspended crude processing after the strike damaged port infrastructure. At the same time, three tankers conducting loading operations sit anchored, unable to complete their scheduled exports to Asian buyers, according to Reuters, citing industry sources and LSEG vessel tracking data.

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Cumulative campaign

The Tuapse halt exemplifies how Ukraine’s systematic strikes are translating into measurable economic retreat. Ukrainian forces have conducted more than 160 precision strikes on Russian oil refineries and energy facilities in 2025, according to Security Service of Ukraine chief Vasyl Malyuk, who described the operations as “kinetic sanctions.”

BBC Verify documented 21 of Russia’s 38 large refineries struck since January 2025, with attacks reaching record levels in August and remaining elevated through October—already 48% more than all of 2024.

The economic consequences are now appearing: Russia’s fossil fuel revenues in September fell to €546 million ($580 million) per day—half of September 2022 levels—while seaborne oil product exports saw a steep 13% month-on-month decline, which the Centre for Research on Energy and Clean Air attributed directly to “Ukrainian drone strikes on Russian oil refineries and ports.”

Sanctions amplify strike campaign impact

The timing compounds the pressure: three weeks before the Tuapse strike, the US Treasury sanctioned Rosneft and Lukoil, including the RN Tuapse Oil Refinery subsidiary. Major buyers simultaneously pulled back: Indian state refineries reduced their Russian crude imports to the lowest level since May 2022, while Chinese state processors canceled cargoes, potentially affecting 400,000 barrels per day.

BBC satellite imagery analysis captured the damage in Tuapse, revealing an oil slick extending 3.6 kilometers into the Black Sea from a terminal that handles 12 million tons annually and exports 90% of its production, primarily to China, Malaysia, Singapore, and Türkiye—markets central to Russia’s sanctions-evasion network.

From tactical strikes to strategic paralysis

Ukraine’s strategy targets both refining capacity, which produces high-margin products, and export terminals, which generate revenue. SBU chief Malyuk stated on 31 October that strikes have forced a 37% idle rate of refining capacity. By disrupting both processing and export infrastructure, the campaign forces Russia to sell lower-margin crude while reducing absolute volumes.

However, some analysts believe that disruption is temporary. “Down the line, you will see that more and more of the disrupted Russian oil, one way or another, finds its way to the market,” Gunvor Group CEO Torbjörn Törnqvist told Bloomberg. “It always does somehow.”

Facilities that survived previous strikes with temporary disruptions now face operational paralysis as damage accumulates, buyers retreat, and repairs require sanctioned equipment that is unavailable under international restrictions—turning repeated tactical strikes into a strategic economic retreat.

Ukrainians withdrew 67.7 billion hryvnias ($1.61 billion) in the third quarter—an 8.2% increase since January—as Russia destroyed half of the country’s generating capacity and triggered complete blackouts that halted digital payments for days.

The National Bank’s data captures a behavioral shift playing out in millions of Ukrainian households as Russia destroyed more than half of Ukraine’s pre-war generating capacity in the first six months of 2025. Cash in circulation reached 890.1 billion hryvnias ($21.2 billion) by 1 October, with officials explicitly linking the acceleration to “increased uncertainty about war ending and intensified air attacks that may cause prolonged power outages.”

High-denomination notes

Ukrainians shifted toward larger bills, with 1,000-hryvnia notes growing 3.6 percentage points as a share of total circulation—the fastest growth of any denomination. The pattern shows households consolidating wealth into easily portable forms rather than simply withdrawing emergency cash for daily transactions.

The 500-hryvnia note remains most common at 26.6% of total circulation, while 50-hryvnia bills comprise just 4.5%.

Nearly worthless coins

The National Bank simultaneously began phasing out 10-kopeck coins on 1 October, citing their 27.4% share of circulation despite “no longer playing a substantial role in cash transactions.”

Ukraine is withdrawing them to reduce state costs for production, processing, transportation, and storage during wartime. At the same time, 50-kopeck coins remain in demand from the retail and service sectors, accounting for 9.1% of circulation.

Digital economy adapting to war

The cash surge marks a sharp reversal for Ukrainian consumers. A May 2025 Visa study found 95% of Ukrainians use digital payment methods, with 68% no longer carrying cash or visiting ATMs under normal circumstances.

Recent attacks demonstrate the threat’s persistence. On 2 November, Russian strikes left the entire Ukraine-controlled portion of Donetsk Oblast without power, with partial outages in Zaporizhzhia, Kharkiv, and Chernihiv.

On 30 October, the barrage deployed 653 drones and 52 missiles targeting the grid. According to Vice Prime Minister Oleksiy Kuleba, Ukraine plans to fortify 100 critical energy sites by the end of this year. At the same time, Russia has adapted tactics to use heavier warheads and more sophisticated drone guidance systems.

European worry becomes policy

The cash hoarding pattern isn’t unique to Ukraine, but the motivation is. European Central Bank researchers documented extraordinary spikes in countries bordering Ukraine as early as spring 2022. Estonia, Lithuania, Slovakia, and Finland saw euro cash demand jump six to ten standard deviations above historical averages in March 2022.

That uncertainty translated into official policy. The ECB research, titled “Keep calm and carry cash,” established physical currency as a “spare tire” for payment systems during crises—a finding CNN reported prompted governments across Europe to formalize cash reserve recommendations. The Netherlands, Austria, and Finland now advise citizens to keep €70-€100 per person for 72-hour emergencies. Sweden recommends enough for a week “if digital payment methods have been interrupted.”

Ukrainians stockpile currency because digital payments actually stop working when Russian missiles destroy substations. The National Bank’s data shows first-quarter cash withdrawals reversed in quarters two and three—a seasonal pattern, officials noted, but amplified by infrastructure vulnerability that has made physical currency a necessity rather than merely a precaution.

The floating oil glut marks a turning point for sanctions enforcement. Russia can still pump crude and load tankers, but every barrel trapped at sea delays revenue funding Russia’s war effort.

Buyers representing more than 95% of Moscow’s seaborne exports now calculate that purchasing from sanctioned Rosneft and Lukoil risks secondary penalties—creating the kind of cash-flow pressure analysts warned could test Moscow’s ability to sustain military operations.

US sanctions trigger steep shipment drop

Russia’s seaborne crude shipments crashed to 3.58 million barrels per day in the four weeks ending 2 November, down 190,000 barrels from the previous period—the sharpest decline since January 2024, according to vessel-tracking data compiled by Bloomberg.

The collapse followed the 22 October US sanctions targeting Rosneft and Lukoil, Russia’s two largest oil exporters. Together, they account for roughly half of the country’s 10.6 million barrels per day output and nearly a third of federal tax revenue.

Russian exporters continued filling tankers at port terminals, yet refiners in India, China, and Türkiye—buyers representing more than 95% of Moscow’s seaborne crude exports—increasingly refused to accept deliveries. The result: 380 million barrels are now floating at sea, up 27 million barrels or 8% since early September, Bloomberg reported.

At current prices near $60 per barrel, that floating inventory represents approximately $1.6 billion in crude that cannot generate immediate revenue for Russia’s war machine.

Chinese state firms cancel orders

The most significant buyer retreat came from China, long considered Moscow’s economic safety net after Western sanctions redirected Russian oil trade from Europe to Asia.

State-owned giants Sinopec and PetroChina stayed on the sidelines after the US sanctioned Rosneft and Lukoil in October, canceling some Russian cargoes, Bloomberg reported on 3 November. Smaller private refiners also held off purchases, fearful of attracting penalties similar to those faced by Shandong Yulong Petrochemical, which the UK and EU recently blacklisted.

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Rystad Energy estimates the buyer pullback affects approximately 400,000 barrels per day—nearly 45% of China’s total seaborne oil imports from Russia.

Shipments to Chinese ports fell to 970,000 barrels per day in the four weeks to 2 November, while deliveries showing no final destination surged to more than 1.3 million barrels per day—oil loaded onto tankers but with buyers yet to materialize.

India, which had absorbed nearly 1 million barrels per day of Russian crude, saw deliveries drop from 1.16 million to 940,000 barrels per day. Indian state-run refiners paused purchases, calculating whether they could continue sourcing from smaller suppliers rather than sanctioned Russian energy giants while avoiding secondary sanctions exposure.

Türkiye, Russia’s third-largest buyer, cut purchases to approximately 320,000 barrels per day as refiners sought alternative supplies from Iraq, Libya, Saudi Arabia, and Kazakhstan.

Oil revenue plunges

Buyer after buyer abandoned Russian cargoes. Bloomberg reported that the gross value of Moscow’s crude exports fell by approximately $90 million weekly to $1.36 billion in the 28 days ending 2 November, with both export quantities and prices declining.

The revenue squeeze comes as Russia faces mounting economic strain across multiple fronts. The country’s budget deficit hit 4.2 trillion rubles ($48.2 billion) in the first eight months of 2025—four times higher than the previous year, according to analysis by Ukrainian economist Volodymyr Vlasiuk.

With real inflation around 25-26% rather than the official 8.2%, and civilian sectors declining, the Kremlin faces what Vlasiuk described as classic stagflation—stalling growth with accelerating prices.

Combined with Ukrainian drone strikes that have reduced Russia’s refining output by up to 90% at targeted facilities, the sanctions-driven revenue loss creates a double squeeze on Moscow’s war funding.

Floating storage reveals sanctions working

The 380 million barrels trapped at sea represent more than delayed revenue—they reveal how sanctions work through incremental strangulation rather than immediate blockade. Russian oil companies can still pump crude and load tankers, but cannot convert that crude into usable war revenue without buyers willing to risk secondary sanctions.

More than 1.2 million barrels per day sit on ships showing destinations as Port Said or the Suez Canal, or vessels from Pacific ports with no clear delivery point. Another 140,000 barrels per day float on tankers yet to signal any destination whatsoever.

Together, these three buyers represented more than 95% of Moscow’s seaborne crude exports—and there is no fourth market capable of absorbing equivalent volumes.

As one tanker after another joins the floating inventory, unable to deliver cargoes, Russia faces an impossible choice: continue loading crude that generates no immediate revenue while paying storage costs and ship rentals, or cut production and accept permanent market share loss.

The floating blockade, invisible to most observers but precisely measured by vessel-tracking systems, may prove the clearest indicator of when economic pressure on Russia’s war machine reaches unsustainable levels.

Belgium is blocking a €140 ($160.7) billion loan mechanism to finance Ukraine’s war effort—despite Brussels holding €193 ($221.5) billion in frozen Russian central bank reserves.

The breakdown comes as Ukraine faces a spring 2026 budget crisis. The country’s Finance Ministry projects needing $74.8 billion over 2026-2027, with only half that amount currently covered by confirmed international support.

The frozen assets loan mechanism is the primary tool to close the financing gap. Without it, EU member states would need to finance Ukraine’s budget shortfall directly from national treasuries—a politically toxic option after pandemic spending strained government budgets.

The standoff tests whether Western democracies can sustain Ukraine support when it requires political risk-sharing, not just symbolic commitments. Belgium holds the leverage because Euroclear, the Brussels-based clearinghouse, controls the frozen Russian funds.

Negotiations reach an impasse

The loan mechanism uses windfall profits from frozen Russian assets as collateral, but Belgium wants guarantees that it won’t bear liability if Russia ever reclaims the funds.

Deputy finance ministers from EU member states met on Tuesday but made no progress resolving Belgium’s demands for liability protection, according to two senior EU officials who spoke to Politico.

The Commission will present Belgium with a memo outlining alternative funding scenarios involving EU borrowing. One frustrated deputy finance minister questioned whether €140 billion could materialize from national budgets: “There’s no way.”

What Belgium demands

Belgium holds the €193 billion in frozen Russian central bank reserves through Brussels-based Euroclear. Prime Minister Bart De Wever has outlined three conditions before supporting the asset-backed loan.

De Wever’s three conditions:

• Shared liability: Belgium demands guarantees that “every member state will share responsibility for the consequences” if the money must be returned to Russia. De Wever insists liability “cannot fall solely on Belgium.”
• Other countries participate: He requires that “every country holding immobilized assets must move with us, because we are the only ones doing this.” France holds about €19 billion ($21.8 billion) in frozen Russian funds, Luxembourg €10 billion ($11.5 billion)—but both have stayed silent about participating in the mechanism.
• Legal transparency: Belgium seeks “transparency about that risk and about the legal basis for this decision.”

De Wever faces his own budget crisis at home. Belgium has yet to pass its 2026 budget and must cut at least €10 billion, and De Wever warns he may resign if no deal emerges by Thursday, one day before the emergency Commission meeting.

The impasse reveals a deeper problem: Western democracies structured Russia sanctions to avoid political risk at home. Freezing assets looked cost-free. Using those assets to help Ukraine requires someone to accept potential liability—nobody wants to go first.

Ukraine’s government collected $1.3 billion more in revenue than budgeted through October, despite recent findings that 94 business sectors increased earnings while simultaneously cutting tax payments.

While businesses optimized their tax bills, other revenue sources—particularly import taxes and personal income levies—performed slightly better than projected. The modest overperformance provides marginally more fiscal breathing room, though Ukraine remains heavily dependent on external financing to cover its massive budget deficit.

“There are currently no risks regarding the implementation of planned defense expenditures,” Roksolana Pidlasa, who chairs the Verkhovna Rada’s budget committee, wrote on Facebook on 3 November, sharing operational budget data showing total revenue of 1.76 trillion hryvnias ($42.8 billion)—53.3 ($1.27) billion hryvnias above the ten-month target.

How Ukraine collected more while businesses paid less

The revenue contradiction stems from Ukraine’s diversified tax base performing unevenly across sectors. Import VAT generated $10.7 billion—the largest single revenue source and well above targets as wartime consumption patterns shifted toward imported goods.

Corporate profit tax yielded $5.5 billion, also above the ten-month target, even though 94 business sectors reported higher revenues alongside lower tax payments. The gap suggests that while some companies optimized their tax positions, the overall corporate base expanded enough to offset individual reductions, or other companies substantially increased their contributions.

Domestic VAT after refunds added $6.2 billion, and import excise taxes contributed $3.3 billion. Only two categories—import VAT and domestic excise—failed to exceed their adjusted targets, indicating broad-based fiscal resilience rather than dependence on a few revenue streams.

Defense spending dominates domestic resources

Ukraine allocated 2 trillion hryvnias ($48.7 billion) to defense over the ten-month period, representing 63.3% of all general fund expenditures. This figure confirms a critical point for Western policymakers: Ukraine finances its war effort predominantly from domestic revenue, not international aid.

Total general fund expenditures reached 3.2 trillion hryvnias ($77.9 billion)—73.7% of the annual plan. Beyond defense, major spending categories included debt repayment ($10.7 billion), social protection for veterans ($7.8 billion), debt servicing ($6.8 billion), medical guarantees ($3.4 billion), and teachers’ salaries ($2.3 billion).

Ukraine supplemented tax revenue with $11.5 billion from domestic bond placements to finance the budget deficit.

What this means for Western aid calculations

The revenue overperformance arrives as Ukraine faces a projected budget deficit of 25% of GDP in 2025, requiring $51.5 billion in external financing. The 3.1% beat provides slightly more fiscal headroom than budgeted, though the fundamental financing gap remains.

The National Bank of Ukraine estimates the country needs declining external support through 2027—from $51.5 billion this year to $45 billion in 2026 and $39 billion in 2027.

Business optimism holds despite energy attacks

The revenue figures align with Ukrainian businesses maintaining cautiously optimistic outlooks despite intensifying Russian attacks. The National Bank of Ukraine’s business activity expectations index reached 50.3 in October—slightly above the neutral threshold of 50—according to a survey published on 3 November.

Trading companies showed the strongest optimism with an index of 54.3, driven by robust consumer demand and decelerating inflation. Construction firms reached 53.3, boosted by budgetary spending on infrastructure restoration and road construction.

Industrial companies reported more guarded expectations at 48.8, citing ongoing destruction of production facilities, high restoration costs, and power cuts. Services companies registered 48.7, affected by damaged railway infrastructure and persistent labor shortages.

The business activity data explains part of the revenue resilience: companies operating and consumers spending generate tax revenue even when individual sectors optimize their tax bills. The National Bank noted that intensifying Russian attacks on energy infrastructure constrain growth, but haven’t derailed economic activity—explaining how Ukraine exceeded revenue targets despite the tax optimization paradox.

The European Commission told Kyiv that “recent negative trends” in corruption enforcement must be “decisively reversed” or risk billions in European funding and accession progress.

The warning marks a decisive turn from July, when Brussels had secretly planned to fast-track Ukraine’s first EU negotiating cluster—until President Zelenskyy’s government stripped anti-corruption agencies of independence, forcing Brussels to abandon the plan entirely. Four months later, Ukraine missed critical reform deadlines, watched its security agencies fight publicly, and saw Brussels go from ally to skeptic.

The Commission’s draft enlargement report, obtained by the Kyiv Independent before Tuesday’s release, acknowledges Ukraine met conditions to open three of six accession clusters—but makes clear institutional stability matters more than checking reform boxes.

“Recent negative trends, including a growing pressure on the specialised anti-corruption agencies and civil society, must be decisively reversed,” the Commission stated in the draft report.

What Brussels is actually worried about

Four months after that July crisis, the institutional damage persists. The question isn’t whether Ukraine can pass reforms. It’s whether those reforms survive when investigations reach politically sensitive targets.

Since July, Ukraine’s National Anti-Corruption Bureau (NABU) and Security Service have been locked into an escalating confrontation involving raids, arrests, and mutual investigations. At the same time, both agencies acknowledge that only Russia benefits from their public standoff.

• 2 September: NABU charges the former head of the Security Service’s cybersecurity unit with illicit enrichment.
• 10 September: The Security Service responds by charging a NABU detective with false declarations.
• 25 September: Security Service searches property belonging to a former NABU detective.

The pattern extends beyond inter-agency warfare. On 28 October, authorities detained former Ukrenergo chief Volodymyr Kudrytskyi—fourteen months after Western board members quit the state energy company in protest, calling his earlier dismissal “politically motivated.” Anti-corruption lawyer Daria Kaleniuk wrote on Facebook that “persecution of government critics through transparently fabricated criminal cases is already a trend,” reversing Ukraine’s European path.

How Ukraine got here

The crisis dates back to ten days in July that nearly killed Ukraine’s accession prospects.

On 21 July, President Zelenskyy signed legislation subordinating NABU and the Specialized Anti-Corruption Prosecutor’s Office (SAPO) to the Prosecutor General—a political appointee. This came one day after authorities conducted over 70 raids against NABU offices, arresting detectives on espionage charges critics called pretextual.

Rare wartime protests forced parliament to restore the agencies’ independence by 31 July, but the institutional damage remained. The Commission’s report reflects what European officials watched unfold: Ukraine’s challenge isn’t implementing reforms but ensuring institutions can function independently under political pressure.

The deadline problem

In September, Ukraine’s parliament rejected draft law №13150—legislation that would have let citizens sue local officials for illegal decisions—with only 206 of 226 votes needed. The missed 31 March deadline was a specific condition for continued Ukraine Facility payments.

Since March 2024, the EU has disbursed over €12 billion in funding for teacher salaries, healthcare workers, and essential government operations, while Ukraine allocates domestic resources to defense. Each missed deadline jeopardizes future tranches.

What Ukraine says it can do

Ukraine has informed EU officials it aims to complete accession negotiations by the end of 2028. The Commission called this “ambitious but attainable” only with faster reforms, though Ukrainian officials privately acknowledge 2030 as more realistic.

“The Commission is committed to support this ambitious objective but considers that to meet it an acceleration of the pace of reforms is required, notably with regards to the fundamentals, in particular rule of law,” the draft report states.

Hungary continues blocking Ukraine from formally opening any negotiation clusters, despite the Commission ruling that Ukraine is technically ready. European Council President António Costa proposed allowing cluster openings by qualified majority rather than unanimous consent, but the Netherlands defended Hungary’s veto rights at October’s Copenhagen summit.

What the warning means

Brussels’ assessment is calculated: Even if mechanisms existed to bypass Hungary, Ukraine’s institutional fragility provides substantive grounds for skepticism about accelerated accession. The Commission praised Ukraine’s “remarkable commitment” to EU membership despite Russia’s war—then immediately warned about “pressure on specialised anti-corruption agencies and civil society.”

Yet, for a country seeking EU membership while fighting an existential war, building institutions that survive political interference when investigations reach sensitive targets may prove harder than any legislative checklist.

The shift from July’s planned fast-track to November’s formal warnings tells you what Brussels really thinks about Ukraine’s trajectory. The question now is whether Kyiv can reverse it before the next tranche deadline.

Belgium collected €1.7 billion ($1.77 billion) in taxes from frozen Russian assets in 2024 while blocking a €140 billion ($145.6 billion) loan mechanism that would redirect those earnings straight to Ukraine. The standoff comes as falling interest rates slash potential aid annually by nearly €2 billion ($2.08 billion).

Belgium’s objection traps Ukraine’s $8 billion IMF loan over three years. The fund requires proof of financial viability that depends on the EU mechanism, which Belgium refuses to approve. According to the National Bank of Ukraine, Ukraine’s 2025 budget deficit stands at 25% of GDP, requiring $51.5 billion in external financing this year alone.

Belgium’s profitable objection

Belgium opposes the €140 billion ($145.6 billion) “reparations loan”—which would use frozen Russian state assets as collateral—citing concerns about financial liability if an international court rules the use of Moscow’s reserves illegal. Most frozen assets sit in Brussels-based Euroclear.

Under the current system, Belgium collects these taxes and decides how, when, and whether to spend that money on Ukraine, maintaining revenue and leverage. Under the proposed EU loan mechanism, earnings flow directly to Ukraine through EU frameworks, cutting Belgium out entirely.

Belgian Prime Minister Bart De Wever has pledged €1 billion ($1.04 billion) annually in defense aid to Ukraine. Belgium claims tax revenue from frozen assets funds, though no independent verification exists of whether the full €1.7 billion ($1.77 billion) reaches Ukraine or funds other Belgian priorities.

The disappearing pot

The delay carries a concrete cost: falling European interest rates mean frozen Russian assets will likely generate €5 billion ($5.2 billion) in 2025, down from €6.9 billion ($7.18 billion) last year, Euroclear reported.

When interest rates climbed in 2022, those frozen assets earned just €821 million ($854 million). By 2023, they earned €4.4 billion ($4.58 billion); in 2024, €6.9 billion ($7.18 billion). That peak has passed. Euroclear warns the decline will continue as central banks cut rates further, meaning every month the EU spends arguing means less money reaches Ukraine’s defense.

The timeline trap

The International Monetary Fund is considering an $8 billion loan to Ukraine over three years. Still, IMF approval hinges on whether the EU can finalize its own €140 billion ($145.6 billion) loan using frozen Russian assets, Politico reported. One European Commission official and diplomats from three member countries told Politico that securing the EU agreement would convince the IMF of Ukraine’s financial viability—a requirement for the Washington-based institution to lend to any country.

EU leaders stripped the €140 billion ($145.6 billion) reference from official conclusions, instead asking the European Commission to present “options for financial support”—language considerably weaker than the concrete proposal Germany and Poland had pushed.

The next EU leaders summit is scheduled for December 18-19, while the crucial IMF meeting determining Ukraine’s loan will likely occur in December, creating a structural impossibility even if Belgium reverses course. Polish Prime Minister Donald Tusk insisted December’s summit must be the “final deadline for a decision: yes or no.”

The ownership question

Belgium’s objection centers on potential Russian legal challenges if Moscow demands asset return after a peace deal or sanctions lift. The Belgian government fears bearing sole financial responsibility if an international court rules against asset use.

When Russia launched its full-scale invasion in February 2022, Europe restricted two of three. Freezing €193 billion ($200.7 billion) in Russian central bank assets denied Moscow exclusivity and enforceability. Russia can’t access the money or sue to recover it. Only transferability remains technically intact—though meaningless without the other rights.

Europe had compelling grounds for these restrictions: a state waging a war of conquest against its neighbor faces consequences under international law. The question now is whether Europe will exercise its authority over the final element of ownership by redirecting those assets to Ukraine’s defense.

Belgian Prime Minister De Wever cites Japan as a precedent, noting that Tokyo holds €50 billion ($52 billion) in frozen Russian reserves and is cautious about direct lending. However, Japan is providing $3.3 billion to Ukraine through the G7’s ERA loan mechanism backed by asset earnings, which is not the type of reparations loan the EU proposes.

What’s at stake

Ukraine’s National Bank projects the country needs $51.5 billion in external financing in 2025, declining to $45 billion in 2026 and $39 billion in 2027. The existing G7 loan program, using only windfall profits from frozen assets, provides a total of $50 billion—far short of the requirements.

While the IMF’s $8 billion program is relatively small, its approval signals to investors that Ukraine is financially viable and on track with reforms, which one Ukrainian official called “a benchmark for other countries and institutions to evaluate whether Ukraine is doing proper governance.”

Without the frozen assets mechanism, European defense support would continue through annual national budgets subject to parliamentary approval and six-month sanctions renewal cycles that Hungary or other member states can threaten to veto.

On the night of 30 October, Russia launched 653 drones and 52 missiles at Ukraine in a single coordinated assault. The primary target wasn’t military infrastructure—it was the power grid. As winter approaches, Moscow systematically dismantles the energy network that Ukraine has spent three years integrating with Europe.

The past that doesn’t want to let go

For Ukraine, it’s the third winter of a calculated campaign to weaponize darkness and cold. Not only that: the energy infrastructure Russia is targeting isn’t just keeping Ukrainian lights on. It’s the same grid now linked to substations in Romania and distribution networks in Poland, and through that to the whole ENTSO-E system that connects all of Europe.

But to Ukraine, attacks on energy infrastructure were no surprise—they were inevitable. In this country, Soviet legacy surrounds: from brutalist facades to statues of Communist heroes, reminders of the country’s recent past as part of the Empire are inescapable.

When the Iron Curtain fell across Europe, the Warsaw Pact countries were tied into a single energy grid controlled centrally by Moscow. Across the Soviet Bloc, resistance to the state was repeatedly met with energy blockades and economic hardship. The Kremlin said it best in an internal memo: “He who controls energy controls obedience.”

With the fall of the Soviet Union in 1991, those legacy systems of energy interdependence did not disappear but evolved into new agreements and partnerships. After all, Russia still controlled vast oil and liquid natural gas deposits, had decades of expertise, and built a vast functioning shipment network feeding into Eastern Europe. Even as post-Soviet states scrambled to gain energy and strategic independence, they remained linked to Moscow through sheer inertia.

Against the inertia

Fighting against that inertia is ENTSO-E, the coordinating body for Europe’s energy grid. They are responsible for linking Ukraine to the Continent’s energy resources and have enabled countries across the region to decouple from the Kremlin.

The ENTSO-E performed an emergency integration with Ukrenergo, Ukraine’s energy utility, and granted emergency import rights to meet critical needs. As other countries along the Russian European border watched Moscow’s military struggles, they were emboldened to build their own energy projects connecting to the European grid. However, while Soviet-era legacy systems were hardened and secure, each new project gave Russia a fresh target.

Visible pattern

In September 2023, debris from Russian drone attacks was found not near Romanian government buildings, but near power substations along the Romanian side of the Danube River. Those substations were supplied, in part, by recent natural gas partnerships with Greece and Serbia. These incursions represented some of the first drone flyovers outside the Ukrainian battlespace. They would not be the last.

This is precisely what the assault on 30 October demonstrated. The 705 aerial threats didn’t randomly scatter across Ukraine—they concentrated on energy infrastructure, particularly the integration points connecting Ukraine to neighboring countries. The emergency shutdowns weren’t just about domestic blackouts but also about protecting the interconnected system.

Russia knows this. Moscow can no longer turn the lights on and off through mere political pressure, as it could during the Soviet era. But by attacking these new nodes systematically, it can attempt to sever them permanently—or, at minimum, make the cost of energy independence unbearably high.

New attack surfaces

These energy assets also present a new cyber attack surface that Moscow can and will use. Russian-linked cybercriminal organizations have already demonstrated the ability to infiltrate and disrupt energy control systems. In 2015 and 2016, cyberattacks on Ukraine’s power grid caused widespread blackouts—the first known instance of malware-induced power loss. Cybersecurity experts have warned that similar tactics could be employed against national grid operators in Eastern Europe or even the entire ENTSO-E network.

A disabled LNG terminal, sabotaged substation, or blackout during a cyberattack could cripple a country’s ability to mobilize troops, support NATO operations, or maintain public order. Such attacks are an immediate concern for the ENTSO-E grid and the Ukrainian war effort relying on that grid. Russia has taken steps thus far to avoid provoking a broader war with NATO, but as the war in Ukraine drags on, the Kremlin’s decision calculus may change.

Recognizing this, NATO has begun to take energy resilience more seriously. Article 3 of the NATO treaty commits members to self-help and resilience, which is increasingly interpreted to include critical energy infrastructure. The NATO Energy Security Centre of Excellence, based in Lithuania, has led efforts to study how energy vulnerabilities intersect with military readiness.

Joint exercises increasingly simulate blackout scenarios and hybrid attacks. For its part, the EU is advancing cooperation through Permanent Structured Cooperation (PESCO) initiatives, such as military mobility and critical infrastructure protection.

These advances have come despite demonstrated Russian willingness to exploit every vulnerability below the threshold of all-out war with NATO. Ukraine approaches its energy decoupling efforts with security at the forefront to ensure these hard-won gains aren’t reversed. Hardening existing infrastructure and entrenching new partnerships in Eastern Europe should be job number one for NATO. For the world’s greatest military alliance, getting this right is important. For Ukraine, it is existential.

Energy infrastructure has always been essential to national survival—but in Ukraine, it’s also become a litmus test of resilience and deterrence. Russia’s long-standing energy dominance is fading, but its ability to strike, disrupt, or destabilize remains. For Ukraine, sovereignty isn’t just about what flows through a pipeline or power line—it’s about ensuring those lines can’t be severed at a moment’s notice.

Thirty-four years after the Berlin Wall fell, Kyiv is finally allowed to fully share in the promise of that moment: a life free from Moscow’s clutches. It has been thirty-four years of hard-fought battles, with many more to come, but strategic energy independence for Ukraine is within reach, and it is worth the fight.

Randall Schmollinger

Randall Schmollinger is an analyst at Geopoly Global focusing on technology and security issues, with a regional interest in the post-Soviet republics.

Editor's note. The opinions expressed in our Opinion section belong to their authors. Euromaidan Press' editorial team may or may not share them.

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Since the Ukraine-Russia gas transit agreement expired in early 2025, Russian strikes have intensified against Ukrainian gas production and infrastructure. The strategy is deliberate: disrupt Ukraine’s heating season and freeze millions of Ukrainians out of their homes—a tactic that constitutes genocide under international law.

The numbers tell the story. According to Naftogaz of Ukraine, Ukrgasvydobuvannya, and the Razumkov Centre, Russia’s targeted attacks in late 2024 and early 2025 cut Ukraine’s gas production by 40%—approximately 8 billion cubic meters annually. Direct damages: €2-4 billion. In autumn 2025, Russian strikes on gas production facilities in the Kharkiv, Poltava, and Sumy regions caused devastating damage to production capacities in these critically important areas.

Russia has attacked Ukraine’s civilian gas infrastructure seven times in October. “I am addressing everyone with a request to use gas as sparingly as possible. Today, every cubic metre saved counts,” CEO of Naftogaz Sergii Koretskyi noted.

From self-sufficiency to dependency

Ukraine’s normal production of 20 billion cubic meters annually covers domestic demand. Russia’s systematic attacks have shattered this self-sufficiency.

Russia’s targeting of gas fields, storage facilities, pipelines, compressor stations, and distribution centers has forced Ukraine into critical dependence on EU imports. Worse, Ukraine must now make emergency purchases during winter—when European gas prices peak.

Russia’s attacks extend beyond production to import routes. In August 2025, Russia damaged the Orlivka gas compressor station near Romania twice. The station is critical for alternative gas supplies from Azerbaijan and energy security across the Ukraine-Moldova-Romania triangle.

Despite the attacks, Ukraine’s gas transmission system continues operating normally. September production reached 45 million cubic meters daily, supplemented by imports from Poland, Hungary, and Slovakia—including a third through Naftogaz’s partnership with Polish energy company ORLEN. For the 2025-2026 winter, Ukraine has contracted 450 million cubic meters of American LNG for delivery through terminals in Poland and Lithuania.

A race against time

Russia’s attacks on production, combined with low reserves and cold weather, forced Ukraine into emergency gas imports in February to cover the deficit at the end of the 2024-2025 heating season. According to ExPro data, Ukraine imported nearly 2.1 billion cubic meters in the first half of 2025—more than twelve times the volume from the same period in 2024, and the largest first-half import since 2020.

In September, Ukraine injected 45-50 million cubic meters of gas daily into underground storage, increasing reserves by 26% from the previous month. Since the injection season began, nearly 6.7 billion cubic meters have been stored—1.7 times more than in 2024.

To reach the target of 13.2 billion cubic meters by 1 November, Naftogaz must import an additional 500 million to 1.5 billion cubic meters to compensate for damaged production. By September 2025, Ukraine had imported 3.3 billion cubic meters—compared to just 275 million in the first nine months of 2024.

Naftogaz secured over €1 billion in international support from the European Investment Bank, European Bank for Reconstruction and Development, and Norwegian grants, supplemented by Ukrainian state bank credits to finance these emergency imports.

On 23 October, the Ukrainian Cabinet of Ministers allocated €174 million to Naftogaz for gas imports to purchase 430 million cubic meters of natural gas. Norway will provide an additional $150 million for gas purchases in early 2026.

The EBRD is preparing an additional €500 million loan to cover gas imports made necessary by Russia’s infrastructure strikes.

The infrastructure protection crisis

While securing sufficient gas volumes is crucial, a critical vulnerability remains: Ukraine lacks adequate protection for gas compressors and distribution stations. Having gas in storage means nothing if transmission infrastructure is destroyed.

Further Russian strikes could fragment Ukraine’s gas system into isolated islands—production remnants in the northeast, storage facilities in the west, and import pipelines along the western border, unable to connect.

Ukraine needs effective anti-drone and anti-missile protection for gas extraction, transportation, and distribution infrastructure, air defense for cities, and physical protection of critical facilities.

Government response and price controls

The Ukrainian government is attempting to balance market stability with consumer protection. In October, authorities raised fixed gas prices for gas-fired producers while freezing residential rates to protect 12.4 million consumers.

The government extended obligations requiring state producers to sell gas at fixed, below-market prices through March 2026 to keep Naftogaz functioning. The Gas Transmission System Operator must purchase a minimum of 340 million cubic meters of imported gas to ensure supply security and diversification.

The international imperative

Russia is deploying full-scale energy terror against Ukraine, weaponizing winter to create a humanitarian crisis. The international community must recognize this strategy for what it is: systematic targeting of civilian infrastructure designed to make Ukrainian territory uninhabitable.

The cost of prevention is measured in millions. The cost of failure will be measured in Ukrainian lives and a humanitarian catastrophe that reverberates across Europe.

As temperatures drop, the question is not whether Russia will continue these attacks, but whether the international community will provide the tools Ukraine needs to defend its people.

Kateryna Kontsur

Kateryna Kontsur is an energy policy expert at Razom We Stand with over 20 years of experience in regulatory policy, EU energy law, and renewable energy systems. She advocates for Ukraine’s energy independence and supply diversification and holds advanced project management and financial analysis degrees.

Editor's note. The opinions expressed in our Opinion section belong to their authors. Euromaidan Press' editorial team may or may not share them.

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The Ilsky oil refinery in southern Russia is the latest to join a growing list of oil plants stuck offline because sanctions block access to repair equipment.

By late October 2025, drone attacks have damaged 16 of Russia’s 38 refineries, and now Western companies like UOP and ABB, which supplied technology to Russia’s 40 largest refineries, have stopped providing the specialized parts and expertise needed for repairs.

Each new breakdown—whether from combat damage or routine failures—becomes difficult and time-consuming to repair, systematically dismantling the fuel production that finances Russia’s war.

Repairs become nearly impossible

The Ilsky facility, operated by KNGK-Holding, officially cited “scheduled maintenance,” but industry sources told Azerbaijani outlet Vesti.az the plant faced sales difficulties and production cuts driven by sanctions, stalled modernization, and market instability.

As Sergei Vakulenko, a Carnegie Endowment energy analyst, put it: “Just like you can’t replace a faulty clutch in a BMW with a similar part from a Russian-made Lada, the same applies in industry.”

Even refineries that haven’t been hit by Ukrainian drones run at reduced capacity because spare parts and specialist repair crews remain scarce under sanctions. Russia’s few resources are being redirected to repair strike-damaged facilities, meaning undamaged plants cannot maintain full production.

Fuel shortage spreads

The International Energy Agency says Ukrainian drone strikes have already cut Russia’s refining output by 500,000 barrels per day and will keep processing rates suppressed until at least mid-2026—a timeline that doesn’t account for additional shutdowns like Ilsky.

The fuel shortage has forced Russia to import gasoline from Belarus, and rail deliveries from Russia’s staunchest ally have quadrupled to 49,000 tons monthly as the Kremlin scrambles to supply domestic markets and military operations.

Ukraine detained its former energy chief, Volodymyr Kudrytskyi, on 28 October, fourteen months after Western board members quit Ukrenergo in protest, calling his dismissal “politically motivated.” The charges stem from a 2018 contractor dispute where court documents show the state recovered all funds and suffered no losses.

The detention follows a troubling pattern. Ukraine has targeted the National Anti-Corruption Bureau, pursued anti-corruption leader Vitalyi Shabunin on questionable charges, and stripped citizenship to remove Odesa’s corrupt but elected mayor—all moves critics say silence government opponents.

Between 2020 and 2024, Kudrytskyi secured $1.5 billion for Ukrenergo from Western partners—triple what Ukraine’s entire Energy Ministry obtained.

The Western board members who helped him get that funding—Daniel Dobbeni and Peder Andreasen—quit when he was fired. Now he’s in detention.

His real offense? Publicly blaming Energy Minister Herman Halushchenko for failing to protect infrastructure from Russian strikes.

Judge Kristina Konstantinova, who has a record of targeting pro-Ukrainian activists, set bail at 13 million hryvnia ($309,000) on 29 October despite prosecutors providing no evidence that Kudrytskyi benefited personally.

The math doesn’t add up

The charges stem from a 2018 contractor dispute in which Ukrenergo sued to recover advance payments—and won. Court documents show the state lost nothing.

Court documents reviewed by investigative journalist Tetiana Nikolaienko show what happened when contractor LLC “Vizyn Rich” failed to complete substation fence work in 2018-2019:

• Ukrenergo filed formal objections to substandard work.
• Ukrenergo sued in the commercial court.
• Ukrenergo recovered 4.8 million hryvnia ($114,000) in advance payments.
• Ukrenergo collected 8 million hryvnia ($190,000) in bank guarantees.

“The state suffered no losses. This is confirmed by court decisions,” Nikolaienko wrote. The actual mistake? A Concordia Bank employee issued guarantees to an unreliable contractor—a due diligence failure by the bank, not fraud by Kudrytskyi.

No evidence of personal financial gain. Just testimony from that bank employee claiming Kudrytskyi intended to seize guarantee funds—despite Ukrenergo’s documented legal battle to recover the money.

Who is Judge Konstantinova?

Lawyer Mykhailo Zhernakov detailed her record, which reveals a pattern of siding with the government against activists:

She authorized unlawful searches of Euromaidan activists in 2013-2014, allowing pro-Russian President Yanukovych to crack down on the leaders of the democratic protests.

In 2021, she ordered house arrest for activists who protested at the Presidential Office supporting imprisoned activist Serhiy Sternenko.

“Our judicial system is still, to a large extent, a genuine, undisguised, hostile agency. A branch of the FSB in the very heart of the capital,” Zhernakov wrote on Facebook.

What Kudrytskyi actually did

Between 2020 and 2024, Ukrenergo under Kudrytskyi secured $1.5 billion in Western grants and loans, of which $500 million came from the Ukrainian Ministry of Energy.

Energy analyst Volodymyr Omelchenko told the BBC that Kudrytsktyi synchronized Ukraine’s power grid with Europe in March 2022 during active combat. Using international funds, he built over 60 drone shelters at substations—more protective structures than all other Ukrainian energy companies combined.

The result was foreseeable. As Kaleniuk explains it: “Instead of punishing saboteur [Energy Minister] Halushchenko, who failed to prepare facilities, they decided to shut up Kudrytskyi, who understands energy and knows who really did what to protect against strikes.”

Western partners noticed. When authorities fired him in September 2024, foreign board members quit in protest. Fourteen months later, he’s in detention over recovered funds from six years ago.

The 2018 allegations

The State Bureau of Investigation detained Kudrytskyi on 28 October. The charges date to 2018, when he was deputy director for investments—a role he left in November 2020.

Prosecutors claim 68 million hryvnia ($1.62 million) in fence reconstruction contracts involved 13.7 million hryvnia ($326,000) in embezzled advance payments. Kudrytskyi faces charges alongside businessman Ihor Hrynkevych, who separately faces charges for supplying 1 billion hryvnia ($23.8 million) in substandard military clothing.

In court, he was blunt: “For me it’s obvious this wasn’t routine investigative work—someone from above requested these actions be conducted this way,” according to the BBC.

The charges carry up to 12 years in prison and asset confiscation. Two MPs—Inna Sovsan and Roman Hlapuk—offered to guarantee Kudrytskyi’s appearance for trial and not flee personally. The court rejected the alternative to detention.

The institutional warfare

Throughout October, NABU and the Prosecutor General’s Office went after each other’s officials. NABU exposed a Prosecutor General’s Office prosecutor trying to bribe High Anti-Corruption Court judges with $3.5 million. The Prosecutor General’s Office simultaneously investigated five NABU employees for alleged corruption.

In the same article, MP Mykola Kniazhytskyi called for using Kudrytskyi’s expertise and international connections during a wartime energy crisis rather than prosecuting him.

"Persecution of government critics through transparently fabricated criminal cases is already a trend," Kaleniuk wrote on Facebook. "It's reversing Ukraine's path toward Europe and pulling us back toward Russian-style governance."

What Brussels sees

Earlier this year, the European Commission threatened to withhold billions after Ukraine tried to subordinate anti-corruption agencies to the Prosecutor General. Mass protests forced a reversal within a week.

Explore further

They came. They cussed. They won.

Now Western donors watch a judge whose daughter praised Crimea’s annexation jail the official who secured more energy funding than Ukraine’s own ministry—over money the state recovered—while foreign board members who quit in protest watch from abroad.

Two questions remain: Will Western partners react, or will they watch? And does Ukraine need its people in the streets again to protect reform?

China now blocks NATO allies from supplying Ukraine with drone components, closing workarounds Kyiv used to sustain its drone warfare against Russia, according to German news outlet ntv.

The country’s drone industry depends on Chinese engines, batteries, and flight controllers for roughly 60% of components—and Beijing just cut off the Baltic and Polish supply routes that provided them.

Yurii Lomikovskyi, co-founder of the defense industry network Iron, told ntv on 28 October that Beijing began prohibiting sales to Baltic states and Poland after determining these countries funnel components to Ukraine.

Ukrainian forces use these drones to hit Russian logistics hubs and ammunition depots hundreds of kilometers inside Russian territory—operations that place Moscow “under pressure not only militarily, but above all socially, economically and politically,” according to military analyst Hendrik Remmel from the German Institute for Defence and Strategic Studies.

Chinese contradictions

The restrictions align with Beijing’s strategic calculus, which it revealed to EU foreign policy chief Kaja Kallas in July. Chinese Foreign Minister Wang Yi told her then that China could not afford a Russian defeat because the United States would then shift its full attention to Beijing.

In August alone, Russia received 328,000 miles of fiber-optic cable from China while Ukraine received just 72 miles, The Washington Post reported in October.

By early 2025, 80% of electronics in Russian drones came from Chinese sources, according to NATO’s assessment. Austrian military analyst Markus Reisner identified Chinese Telefly turbojet engines in Russia’s new glide bombs, which can strike targets from 200 kilometers away.

Lomikovskyi sees the solution in accelerated European investment in local production capacity. “Why do we source so much from China? Because China can deliver at scale—and cheaper than anything we produce locally or can buy from our Western partners,” he said.

My night train from Lviv pulls into Odesa on a Friday morning at half past six. The Pearl of the Black Sea is barely awake.

Waiting for the first cafés to open, I walk the empty streets and ask myself: why is there still business—foreign business—in a city under regular attack? Why do companies from Denmark, Germany, the USA, and Italy operate here now, during a war that could easily have emptied this city on the waterline—a city within range of Russian drones and missiles just sixty kilometers away in Crimea?

Yet, while some left, others came, and some stayed. These people run software firms, logistics centers, timber factories, and engineering bureaus. They sign contracts between air raids, drink wine during blackouts, work from their basements during missile attacks, and call it normal.

I’ve come to understand what makes Odesa endure and attract people who could have an easier life elsewhere.

A safe island in the storm

Viktoriia Klimenko works for Pharmbills, a US remote workforce company that manages American clients from its Odesa office. She remembers February 2022 as a moment of panic and of opportunity.

“When the war started, lots of people lost their jobs,” she says. “Pharmbills was a safe place. We had no salary delays. Stability helps when the world gets crazy.”

Her words already hint at one answer to my question:

While local firms froze hiring and competitors fled to EU countries, Pharmbills doubled its staff. The company installed generators, built an internal bot to check employees’ safety, and paid in dollars.

“Dollar salaries became not just a benefit but a psychological anchor,” Klimenko explains. “People knew they could plan their lives. That’s rare now.”

Firms linked to Western partners suddenly have a recruiting advantage—not necessarily because they pay more, but because they symbolise reliability while those paying solely in hryvnia struggle with inflation and uncertainty.

So one reason they stay: stability itself has become a product to sell.

A Danish lesson in remote endurance

Akkermann Engineering & Software feels like a Danish enclave in Odesa: white walls, ceilings, and cupboards contrast with black height-adjustable tables, plenty of glass, everything adhering to strict Danish norms. The company’s founder, Thomas Sillesen, isn’t shy about his approach.

Sillesen’s engineers design mechanical components for Scandinavian clients. The company headquarters moved to Odesa from Luhansk in 2014, as the war in Donbas against Russian-supported separatists was starting.

Maybe that makes Sillesen, without meaning to, a veteran of endurance.

Reflecting on what the war has taught him, Sillesen reaches further into the past, to COVID times.

“COVID trained everyone to work from home,” he explains. “Clients got used to seeing our engineers on video with fake backgrounds. They just wanted the work done. When the war came, that habit saved us.”

Sillesen’s staff, scattered from Zaporizhzhia to Lviv, now collaborate online.

This is his answer to why he stays: not blind courage but deliberate fearlessness — the cool logic of someone who measures risk and decides it’s worth taking. What Thomas Sillesen misses most is seeing his team together. There hasn’t been a company party in three years.

“I miss that,” Sillesen says. “Just saying hi to fifty guys in the morning—gone. When the war is over, we’ll still work hybrid, but Fridays will be for pizza and beer again.”

He speaks like a man who already imagines that future, which may be the quietest reason of all to remain: staying here means believing there will be an “after.”

A German who came for freedom—and stayed

For Philipp Hasselbach, a German who founded the logistics company STEX GmbH, Odesa first appeared not as a business prospect but as a revelation.

“I saw videos from Arcadia during COVID,” he explains over coffee at a very-Odesan pastry shop with pink walls, neo-rococo-style cups, and cakes that look like art from pre-revolutionary France. “People dancing on the beach while Germany sat in silence. I thought: That’s where I want to live!”

He arrived in 2020 to enjoy life, but soon decided he couldn’t just hang around in the nightclubs of Arcadia—Odesa’s beach and nightlife district—doing nothing meaningful. So he rented a small office, posted job announcements, and waited to see what would happen. What happened: he never left, even after the invasion.

That sentence captures the Wild South spirit: a blend of defiance, irony, and unshakable instinct for survival.

STEX ships urgent parcels across Europe using the same model as Pharmbills or Akkermann: clients abroad, office staffed with young multilingual Ukrainians here. Still, even with the internet and phones, connections to the outside world matter for organizing daily life.

In his case, improvisation has become a business method. The risks that scare off others are what make his company competitive: cheaper staff and offices, less bureaucracy and regulations, and a city that just doesn’t let one go.

The city that works when logic says it shouldn’t

At the harbor, cranes stand mostly idle. Some ships dare to cross the perilous waters from the Dardanelles to Odesa, but not many—the port remains a regular target for Russian attacks. The night before I met with Philipp, there were missile strikes.

I hear nothing. The thick walls of my downtown Airbnb turn the explosion into silence. It’s an unsettling kind of safety—the illusion of distance where none exists. When I step outside the next morning, the city is already humming quietly, as if the night had been erased.

The café Foundation—one of the best, according to many Odessites—opens at eight. As I enter to drink tea in the place everyone else seems to visit for its impressive selection of coffee, I notice a group of fashionable youth gathered here. The up-and-coming youngsters wear sporty clothes, but it looks like they do so not to get sweaty but to look cool. They’re bent over iPhones or tablets, plotting how to take over the world—with IT startups.

I discuss this with my friend Michael Löffler, who runs a small AI software firm. Originally from Bavaria, Germany, he has lived in Odesa since 2005 and fondly calls the city’s lifestyle an “organized disarray.”

“We’re disconnected from the Ukrainian economy a bit,” he confirms Philipp’s assessment, “but we live here and see how things develop. There’s still business—just in a different shape. You fix one problem, another appears, and somehow it balances out.”

Although understanding the plight of many ordinary Ukrainians, Michael isn’t too worried about Odesa’s economic prospects in the grand scheme of things. He’s been following real estate prices for years. “And they haven’t fallen far as much as one might imagine.” Indeed, comparing prices across Ukrainian cities, Odesa holds the middle: a theoretical one-bedroom apartment costs $65,000 in Kyiv, $14,000 in Kherson, and $44,000 in Odesa.

Jörg Maus, another German (yes, there are quite a few of them here!) whose forestry company Biosol continues to export timber products, puts the situation more bluntly: “People realized nobody would save them. You keep working, or you close. Yes, there are days when you think it’s impossible to continue, but then you find a way.”

The employment situation has gotten harder, Jörg admits. Young men are afraid to leave their homes, worried about conscription. “Good workers are very difficult to find,” he says. “Most people try to find jobs where they can work from home. It’s much stronger now than people getting out.”

Despite the difficulties, he’s stayed. Like the others, he’s invested years here, built relationships, and found people he can trust.

Trust. That’s another word that keeps returning in these conversations. Those who stay do so because they have built something personal: companies, friendships, loyalties, or even families that can’t be moved just like that to Warsaw, Copenhagen, or Vienna. The war tests those ties daily, and so far, they hold.

What foreign companies mean to Odessites

Jörg sees the challenge from the employer’s side—finding workers who can and will show up. But from the worker’s perspective, Viktoriia Klimenko at Pharmbills explains what having foreign companies here actually means for young Odessites.

Yes, dollar salaries provide stability—that psychological anchor she mentioned earlier. But the deeper value lies in what the city lacks: Odesa doesn’t have many big corporations or white-collar jobs.

Foreign employers have quietly become a bridge between Odesa and the wider world. They bring not just money but a different rhythm: deadlines, video calls, performance reviews—the small rituals of global normality that remind people what ordinary life used to feel like.

For people at the beginning of their careers who want to understand how the global economy works, foreign companies offer something local firms often can’t. When Viktoriia interviews someone with experience at another foreign company, she knows that person already understands international corporate processes and mentality—a rare commodity in a city where most work is purely local.

Early in the war, hiring was easier—local companies closed and people came to Pharmbills for stability. But the ongoing challenge is different. “Lots of good professionals have moved to other countries,” Viktoriia says.

Pharmbills adapted by opening an academy—free online courses where people learn corporate skills and industry-specific terminology. People can test whether they actually want this kind of work before committing.

The office itself has transformed. During severe blackouts, every chair was occupied—people came because the office had generators. The company provided power banks, rented houses in western Ukraine during the worst periods, and allowed employees to work remotely from safer locations or even from other countries.

As for daily life in Odesa? Viktoriia has adjusted like everyone else. “It’s absolutely normal to have coffee in the morning after a sleepless night during an attack, then get some nice lunch, and after that, get the work done.”

Viktoriia adds that there’s a joke among residents:

What she describes isn’t denial but adaptation. The war has turned survival into a routine. For Odesans working with foreign companies, normality—even if partial or lasting only a few hours between air-raid sirens—is not an illusion; it’s a decision.

“But Ukrainians adjust well to whatever is happening,” Viktoriia concludes. “We’ve learned how to live in these circumstances.”

Beyond resilience

Odesa isn’t simply enduring—it’s improvising its way forward, refining a new logic of motion that is both pragmatic and absurd. In Odesa, disorder isn’t an obstacle; it’s a management style.

A city that should be paralyzed by fear runs on caffeine, improvisation, and the stubborn belief that everyday life must continue. It works not because logic says it should, but because people have decided it must. The Wild South — that’s how I keep thinking of Odesa. A place that shouldn’t work, yet somehow does.

Maybe that’s the answer I was looking for. They stay because Odesa, even under fire, offers something rarer than safety: a sense of meaning. It’s the one place where ordinary acts—running a meeting, delivering a parcel, fixing a power line—feel like defiance itself.

This is Chapter I of a series exploring how Odesa’s business community navigates Europe’s largest war since World War II. Coming up: Odesa’s population just turned over by half. New people, old debates, and the question no one wants to ask: What kind of city emerges from this?

China’s newest refinery nearly doubled its Russian crude imports to a record 370,000–405,000 barrels per day in November—not despite Western sanctions, but because of how badly they misaligned.

When Britain and the EU blacklisted Shandong Yulong Petrochemical on 16 October over its Russian oil purchases, Washington didn’t follow suit. Instead, the US sanctioned Russian producers Lukoil and Rosneft in its October package.

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Trump finally acts after months of hesitation — Russia’s Rosneft and Lukoil now sanctioned

The refinery moved fast. According to Reuters, after Middle Eastern and Canadian suppliers cancelled shipments following the UK designation, Yulong replaced them with Russian crude. The plant—backed by Shandong’s provincial government and valued at over $20 billion—is running above 90% capacity.

Record imports fuel Kremlin’s war chest

That surge translates to roughly 12 million barrels per month flowing to Russia at current purchase rates, revenue heading straight into Moscow’s war budget.

The October sanctions were supposed to close gaps. Yet, Western allies targeted different parts of the supply chain at different times, creating legal grey zones that allowed oil to flow through new intermediaries.

Provincial player steps in where state giants won’t

China’s state importers like Sinopec’s subsidiary Unipec paused Russian trades after Washington’s designations, wary of secondary sanctions. Private and provincial refiners saw opportunity instead, and Yulong took over several East Siberian oil shipments originally earmarked for Unipec.

Yulong’s record November purchases—potentially extending into the coming months, sources say—show how coordination failures don’t reduce oil flows; they shift trade eastward. As long as Western allies sanction different links in the same supply chain without coordination and at different times, Moscow can count on someone to keep the barrels rolling.

Parliamentary data shows 94 economic sectors cut tax payments despite revenue growth, directly reducing ammunition purchases and soldier salaries.

Danylo Hetmantsev, chair of the Verkhovna Rada’s finance committee, reported that new parliamentary data show businesses across 94 economic sectors increased sales but decreased tax payments during January-August 2025.

Each hryvnia businesses don’t pay, which means ammunition is not purchased, soldiers are not paid, and defense production is not funded.

The timing couldn’t be worse

Ukraine allocated $53.5 billion to defense in 2025—26.3% of GDP, roughly equivalent to all projected domestic revenue. By the first quarter of 2025, Ukraine had already spent 75% of its entire state budget on defense, with international aid covering civilian functions while domestic taxes fund military operations.

The numbers show a troubling pattern across the national economy. Take beer producers: they sold 2.86 billion hryvnias ($68.1 million) more beer (+8.3%) in the first eight months of 2025 but paid 47.1 million hryvnias ($1.12 million) less in VAT (−2.8%). Corporate income tax shows the same pattern—income up 9.8%, payments down 4.8%.

Plastic packaging manufacturing shows even sharper contradictions. Firms expanded output by 2.9% (569 million hryvnias / $13.5 million) while slashing VAT contributions by 106 million hryvnias ($2.52 million) (−24.8%). Their profit tax followed the same trajectory: income increased 5.2%, but payments fell 16.8%.

Data analytics catch what audits miss

“Business shows growth, but less reaches the budget,” Hetmantsev stated. “And these are not isolated cases—dozens of such sectors.”

Hetmantsev emphasized the shift from physical inspections to analytical detection: “To see the problem, you don’t need to go out to enterprises with audits. Quality tax control requires analytics—it should be the first to catch anomalies in indicators. If supply volumes grow and tax accruals fall, this should immediately raise questions. At the level of data analytics, not after hundreds of millions of hryvnias have ‘disappeared.’”

Who’s really paying for Ukraine’s defense?

The pattern raises uncomfortable questions for Ukraine’s international partners. Western partners have provided over $309 billion from at least 41 countries since 2022, structured around the assumption that Ukraine would maintain robust domestic revenue collection. Systematic tax decline means Western taxpayers effectively subsidize Ukrainian businesses’ tax optimization while their governments press for military support increases.

Ukraine’s trajectory moves in the opposite direction—businesses are growing, tax payments are shrinking, and foreign donors are filling gaps.

The government structured the 2025 budget assuming substantial tax collection would cover military spending while international partners funded civilian operations. Systematic tax reduction undermines this model. Ukraine tripled its military levy from 1.5% to 5% in December 2024 to close defense funding gaps, yet businesses found ways to reduce overall contributions.

Businesses owe an explanation

Hetmantsev acknowledged that economic factors might explain some discrepancies—input cost increases, margin compression, legitimate deductions—but stressed these must be verified rather than assumed. “There may be grounds for this, but they definitely need to be clarified,” he noted on his Telegram channel.

The question extends beyond tax administration quality. “When the budget receives less, we all lose,” Hetmantsev said.

Ukraine’s fiscal model assumes businesses pay taxes proportional to economic activity. When 94 sectors simultaneously show revenue growth alongside tax payment declines, the model faces systemic stress precisely when the country can least afford it.

The broader fiscal context amplifies these concerns. Ukraine’s debt servicing consumes 42% of domestic revenues, leaving a limited margin for tax collection shortfalls. The government projects needing $120 billion for military spending in 2026, even if fighting intensity decreases, making sustained domestic revenue generation essential for maintaining defense capabilities.

Every hryvnia that disappears from tax collection reappears as unfunded military needs or additional requests to Western partners already facing domestic political pressure over Ukraine support.

Over the past six weeks, the proposed EU “reparation loan” has moved closer to reality. It is backed by over $200 billion in frozen Russian Central Bank reserves held mainly in Belgium’s Euroclear.

This reparation loan, long in discussion, now appears closer than ever to reality. Belgium has raised reservations about the mechanism, though these are expected to be resolved through negotiations. Similar concerns from France and Germany could emerge, but have not been formally stated.

Still, while the EU and Ukraine have spent months refining the legal framework for confiscating Russian assets or profits derived from them, far less attention has been paid to a parallel question: how those resources should be deployed once secured.

A recent example offers a hint. On 22 October, Sweden announced that Ukraine would receive between 100 and 150 Gripen fighter jets manufactured by Saab. The announcement was vague on financing, but the timing—days after loan details emerged—suggests this may be funded through the reparation mechanism rather than Sweden’s aid budget.

If so, the pattern continues. And Saab may not be alone: Rheinmetall, Dassault Aviation, BAE Systems, Lockheed Martin, and MBDA could soon follow, each offering long-term contracts that align with their production schedules rather than Ukraine’s immediate tactical needs.

Aid as a procurement opportunity

The United Kingdom, for example, announced two funding tranches in February and July 2025, tied to major Thales contracts for 10,000 air-defence missiles. But timing mattered: Russia had just escalated to mass drone attacks—300 to 500 drones per night instead of dozens.

The Thales missiles worked against minor incursions but couldn’t scale to swarm defense. By the time contracts were finalized, Ukraine had already begun mass-producing FPV drone interceptors that cost a fraction of Western missiles and proved more effective against saturation attacks.

Would London have approved those tranches without the boost to a Belfast factory—and the accompanying pledge to protect or create hundreds of jobs? That remains a rhetorical question.

Long-term contracts vs. short-term survival

The situation with the Gripens may differ, but the broader EU logic is clear. Channeling the loan into contracts for Europe’s defence industry fits neatly into the bloc’s long-term strategy to revitalise its military-industrial base. Yet for Ukraine, linking the funds to long-term foreign contracts risks a critically negative outcome.

Initiatives like the “Danish model,” the PURL program, and partnerships with local manufacturers could deliver faster and more flexible results.

The Danish model allows Ukraine to procure equipment directly from manufacturers with Danish funding, bypassing lengthy European procurement rules. The PURL programme (Prioritized Ukraine Requirements List) similarly enables fast-tracked weapon supplies from the US

Finding the right balance between Ukraine’s immediate needs and Europe’s industrial ambitions is essential.

Why Ukraine wants control

The recent Reuters report that Kyiv wants to manage the loan independently makes perfect sense. The loan aims to ensure Ukraine’s stability amid a full-scale war—and, should peace talks eventually start, to strengthen its negotiating position.

Regardless, if Ukraine receives a package of expensive, long-term contracts instead of flexibility, this “support” will become largely symbolic. A year ago, the need for massive drone defence was far less urgent. No one can confidently say what Ukraine’s priorities will be six or twelve months from now.

Beyond battlefield needs

A portion of these funds must also be directed toward two other vital goals: reconstruction and compensation for losses. European partners remain reluctant to frame the use of Russian assets in terms of reparations, yet these questions are becoming unavoidable.

Proposals already exist to allocate even a small percentage of the loan to urgent reparations, which are also gaining traction within the international compensation mechanism.

Today, the war’s course—and perhaps even the outcome—may hinge on this decision. All parties must recognise that Europe’s security and the health of its defence industry depend on the success of Ukraine’s army—not at its expense.

Ivan Horodyskyy

Ivan Horodyskyy, Ph.D. (Law), is Managing Partner at Dexis Partners, co-founder of the Dnistrianskyi Centre, and a Board Member of the Ukrainian Bar Association.

Editor's note. The opinions expressed in our Opinion section belong to their authors. Euromaidan Press' editorial team may or may not share them.

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Russia’s defense manufacturing is stalling for the first time since 2022, and ISW’s data confirms the pattern Ukrainian analysts warned about weeks ago.

The timing matters because sanctions and unsustainable wartime spending are now fracturing Russia’s manufacturing capacity precisely when Moscow needs maximum production to sustain its eastern offensive.

Manufacturing decline hits critical sectors

ISW reported on 26 October that Russian Federal State Statistics Service data shows fabricated metal production decreased 1.6 percent year-on-year in September 2025, after surging 21.2 percent in August. Transport equipment output growth—including tanks and armored vehicles—slowed to six percent, down from 61.2 percent the previous month.

Russia’s machine-building sector, heavily dependent on state defense orders, fell 0.1 percent in September after surging 15.7 percent in August.

This confirms the economic fracture pattern Euromaidan Press documented two weeks ago, when economist Volodymyr Vlasiuk’s analysis revealed Russia’s real inflation running at 25.6 percent—not the official 8.2 percent—with civilian sectors declining across the board and business “mortality” exceeding new company registrations for the first time since sanctions began.

US Treasury validates inflation assessment

US Treasury Secretary Scott Bessent’s 26 October statement to CBS News aligns precisely with the earlier analysis. Bessent confirmed Russia’s inflation rate exceeds 20 percent—contradicting Moscow’s official statistics—while Russian oil profits have fallen 20 percent year-on-year.

These assessments validate Euromaidan Press’s 12-18-month collapse timeline and suggest Moscow’s window for sustaining its offensive is narrower than the Kremlin claims.

The dysfunction reveals a fundamental problem: national interests trump collective commitments, and the delay isn’t just postponing help—it’s watching that help evaporate.

Belgium blocked the EU plan at the October summit. Every month spent arguing means less money for Ukraine, because falling interest rates steadily reduce what those frozen assets can earn. What peaked at €6.9 ($8) billion in earnings last year is trending toward €5 ($5.8) billion this year.

Euroclear, the Brussels company holding most of Europe’s frozen Russian assets, reported €3.9 ($4.5) billion in interest earnings through September 2025—down from €6.9 ($8) billion for all of 2024. Falling European interest rates are the culprit, and Euroclear warns the decline will continue as central banks cut further.

The money keeps shrinking

When interest rates climbed in 2022, those frozen assets earned just €821 ($952) million. By 2023, they earned €4.4 ($5.1) billion; in 2024, they earned €6.9 ($8) billion.

That peak already passed. This year’s €3.9 ($4.5) billion through three quarters means the annual total will fall well short of last year—possibly to €5 ($5.8) billion or less.

According to British economist Timothy Ash, Ukraine needs an estimated $100-150 billion annually to sustain its defense and economy. The existing G7 loan program uses only windfall profits to provide $50 billion. As interest rates fall, even that limited stream is drying up.

Belgium blocked progress at the October 23-24 Brussels summit. EU leaders vowed financial backing for Ukraine but held off on the frozen assets plan, setting a vague December deadline instead.

Belgium’s real objection: control, not just cash

Belgium’s resistance makes sense when you consider what it stands to lose. The Belgian government owns 12.92% of Euroclear—9.85% directly through the Federal Holding and Investment Company and 3.07% through a consortium of seven Belgian institutions.

Euroclear’s balance sheet shows €227 ($263) billion in total assets as of September 2025, with €193 ($223.9) billion representing sanctioned Russian holdings. The company processes over €1 ($1.16) quadrillion in transactions annually and reported €1.4 ($1.6) billion in underlying business income for the first nine months of 2025—a 7% year-on-year increase in its core operations.

De Wever demands three conditions before supporting the asset-backed loan: transparency about frozen assets in other EU countries (France holds roughly €19 ($22) billion, Luxembourg €10 ($11.6) billion), legally binding risk-sharing guarantees from all member states, and a solid legal basis for the mechanism.

One country, 27 hostages

Belgium’s obstruction reveals a structural problem in European decision-making. When collective action requires unanimous agreement, any member state can hold the process hostage for national interests. The frozen assets plan needs Belgium because Euroclear holds 86% of Europe’s Russian holdings.

This isn’t unique to Belgium. Similar dynamics played out over energy sanctions, military aid packages, and financial support mechanisms throughout the war. Individual countries leveraged their veto power to extract concessions, delay decisions, or water down commitments—all while proclaiming unwavering support for Ukraine.

Each month of delay doesn’t just postpone help—it reduces the available help, as falling interest rates steadily diminish what frozen assets can generate.

Euroclear’s risk claims don’t add up

Euroclear reported direct costs of €82 ($95) million from implementing sanctions in the first nine months of 2025, plus €25 ($29) million in lost business income. The company faces 94 legal proceedings in Russian courts seeking to access blocked assets, and Euroclear states, “the probability of unfavorable rulings in Russian courts is high.”

But the transparency problem cuts both ways. Euroclear has contributed around €5 ($5.8) billion to the European Fund for Ukraine, yet it has retained significant profits “as a buffer against current and future risks.”

That €107 ($124.4) million in claimed costs and losses looks modest next to €1.7 ($2) billion in taxes Belgium collected, or the €3.9 ($4.5) billion Euroclear earned from frozen assets this year alone.

The gap between promises and actions

EU leaders tasked the European Commission with presenting “options for financial support” for Ukraine’s 2026-2027 needs at the December summit. The watered-down language—agreed by all member states except Hungary—shows Belgium’s success in diluting earlier drafts that would have committed to the €140 ($162.8) billion reparation loan.

Poland’s Prime Minister Donald Tusk insisted December must be the “final deadline” for a decision. Germany’s Chancellor Friedrich Merz backed the loan as necessary to prevent Berlin from shouldering Europe’s Ukraine costs alone.

The situation exposes how individual national interests can derail collective commitments, even with enormous stakes. Europe’s leaders can debate how to structure the loans, who bears the risk, and how to compensate Belgium. But while they talk, the window of opportunity is closing. The clock is ticking, and with every month of delay, there’s less money to argue about.

While Ukraine fights Russia’s invasion with constrained Western support, Hungary publicly plots to circumvent US sanctions against the oil giants funding Moscow’s war machine.

Hungarian Prime Minister Viktor Orbán announced Friday his government is “working on how to circumvent” Trump’s Wednesday sanctions on Rosneft and Lukoil—creating the spectacle of America’s closest EU ally openly defying its pressure campaign just hours after Trump called them “tremendous sanctions.”

The contradiction reveals what drives Europe’s energy relationship with Moscow: not necessity, but political will. Hungary imports 90% of its gas and 65% of its oil from Russia despite having viable alternatives.

Trump’s ally in the crosshairs

The US Treasury designated Rosneft and Lukoil on 22 October, targeting companies that export 3.1 million barrels daily—70% of Russia’s overseas crude sales. This threatens immediate disruption for Hungary and Slovakia. Hungarian oil and gas company MOL’s refineries in both countries process 14.2 million tonnes of Russian crude annually via the Druzhba pipeline.

Trump described the move as pressure on Putin. “I just felt it was time. We’ve waited a long time,” he said on Wednesday.

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However, within 24 hours, Orbán announced his circumvention plan in a state radio interview, providing no details about the scheme.

The workaround playbook

Hungary has done this before. When Ukraine sanctioned Lukoil in 2024, MOL struck deals to “take over ownership of the affected crude oil volumes at the Belarus-Ukraine border,” as MOL said.

Whether this works against US sanctions remains unclear. American measures typically focus on the ultimate source rather than border transfers, but enforcement depends on Trump’s political will to pressure his ally.

Alternatives Hungary refuses

Croatia’s Adria pipeline has been connected to Hungarian infrastructure since 2015 and has a capacity of 14.3 million tonnes annually—more than Hungary’s refineries need. MOL reported in October 2024 that it can process 30-40% non-Russian crude and plans to reach 100% capability by the end of 2026. The company operates a 9.57% stake in Azerbaijan’s ACG oil field and has tested over ten alternative crude grades.

A May 2025 study found Hungary and Slovakia “have exploited” their EU exemption from the Russian oil embargo, maintaining imports above pre-invasion levels “in violation of the intent of EU legislation.” The price difference—Russian oil trades at steep discounts—explains the preference.

The broader pattern

Orbán has repeatedly used veto threats to extract concessions from the EU, blocking sanctions packages worth billions. Trump had previously conditioned US sanctions on NATO allies stopping Russian oil purchases.

China’s state oil giants have suspended Russian crude purchases following the sanctions, and Indian refiners are cutting imports. But in Budapest, Trump’s closest European ally is already plotting workarounds to keep Russian oil flowing, turning “tremendous sanctions” into a test of whether friendship trumps policy.

Belgium blocked the EU’s plan to use €183 billion ($196 billion) in frozen Russian assets to fund Ukraine at the October 23-24 Brussels summit, refusing to move forward until other member states provide legally binding guarantees they’ll share litigation risks if Russia retaliates or sues for asset return.

The summit concluded with leaders asking the European Commission to prepare “options for financial support” for Ukraine through 2027—language considerably weaker than the €140 billion ($150 billion) “reparations loan” that Germany and Poland had pushed heading into the meeting.

Belgium, which holds most frozen Russian funds through Brussels-based Euroclear, would not accept sole responsibility for potential Russian retaliation or international legal challenges.

Why this matters

Ukraine spends $172 million daily on defense. Within weeks of the February 2022 invasion, Europe froze €183 billion ($196 billion) in Russian central bank assets, yet has managed to transfer only interest earnings—not the principal—to Ukraine. The existing G7 loan program, using only windfall profits, provides a $50 billion total—far short of Ukraine’s estimated $100-150 billion annual requirement, according to British economist Timothy Ash.

Germany’s Friedrich Merz warned that without the frozen assets mechanism, Berlin fears being left to shoulder Europe’s Ukraine costs alone.

If the December summit fails to break the deadlock, Ukraine will remain dependent on annual aid packages subject to parliamentary approval and the six-month sanctions renewal cycle. Hungary or other member states can threaten to veto either.

Without mobilizing the Russian assets principal, European defense support would continue through national budgets at current levels: Germany allocated €7.1 billion ($7.6 billion) for Ukraine in 2024, France €3 billion ($3.2 billion), and most other EU states contributed under €1 billion ($1.1 billion) annually.

Three core demands

According to Belgian Prime Minister Bart De Wever’s statements at the summit, when European Council President António Costa said the bloc must “work out the technical, legal, and financial details,” he was referring to Belgium’s three core demands.

Technical aspects: Belgium wants transparency about which other countries hold frozen Russian assets and how much. While Euroclear holds €183 billion ($196 billion), France has roughly €19 billion ($20 billion) and Luxembourg €10 billion ($11 billion), according to European Parliament research. De Wever demanded these countries contribute their share:

Legal aspects: The Commission must establish what De Wever called a “solid legal basis” for converting frozen assets into loan collateral without technically confiscating them. The proposed mechanism would transfer Russian cash to a Special Purpose Vehicle in exchange for zero-coupon bonds—essentially swapping liquid money for IOUs that generate no interest. This allows Brussels to claim Russia still “owns” bonds of equal face value, making it legally distinct from outright confiscation.

Belgium disputes this distinction. As De Wever argued earlier this month:

Belgium fears facing arbitration claims in international courts—potentially before judges in Singapore, Hong Kong, or other jurisdictions where Russia maintains legal standing—and being ordered to return billions while other EU states avoid liability.

Financial aspects: Belgium demands legally binding guarantees—not just political assurances—that all EU member states would share the cost if Russia successfully sues for asset return or if the money must be repaid after a potential peace deal. German Chancellor Merz indicated Germany expects to contribute proportionally by economic size, but Hungary has already said it will not offer guarantees.

Belgium also faces losing €1.3 billion ($1.4 billion) annually in corporate tax revenue from Euroclear’s earnings on the frozen funds—money it currently spends on Ukraine aid. De Wever wants compensation for this loss included in any deal.

An unchanged position

The summit text represents a successful Belgian effort to water down earlier language that would have called for a concrete legal proposal.

Since early October, De Wever has maintained that Belgium fears facing arbitration claims in international courts and being exposed to Russian retaliation while other member states avoid consequences. Commission President Ursula von der Leyen assured reporters that “the risks have to be put on broader shoulders,” but acknowledged the bloc still needs to work out how to make that happen in practice.

Contrasting success

The summit’s paralysis on frozen assets stood in sharp contrast to leaders’ ability to approve the EU’s 19th sanctions package against Russia, including a ban on Russian liquified natural gas imports starting in 2027 and additional restrictions on the “shadow fleet” Moscow uses to evade oil sanctions.

These measures followed the United States hitting two Russian fossil fuel giants with sanctions—a move French President Emmanuel Macron called “a true turning point,” noting that “until now, the US had refused.”

Ukrainian President Volodymyr Zelenskyy, who attended the summit, told reporters Ukraine needs the money in 2026, “and better to have it at the beginning of the year, but I don’t know if it’s possible.”

The December reckoning

The December summit will determine whether the Commission’s legal and financial proposals can satisfy Belgium’s demands for concrete, legally binding risk-sharing commitments. If they cannot, the €183 billion ($196 billion) principal will remain frozen—a gap between Europe’s stated support and its willingness to act that has persisted for more than three years since the assets were first immobilized in April 2022.

Russia’s specific retaliation options include seizing Western corporate assets still operating in Russia (estimated at over €200 billion), targeting European financial institutions in international courts, or weaponizing energy supplies to countries still dependent on Russian gas.

Ukrainian soldiers spent 400 million hryvnia ($9.6 million) daily on online casinos in 2023—more than the entire nation donated to its Armed Forces that year.

Junior Sergeant Pavlo Petrychenko saw the crisis firsthand. His March 2024 petition warning that soldiers were pawning drones and thermal imagers to cover gambling debts gathered 25,000 signatures in a single day.

Petrychenko died defending Donetsk Oblast on 15 April 2024—two weeks after registering his appeal. President Zelenskyy posthumously awarded him the title of Hero of Ukraine and enacted restrictions on military gambling.

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Nine months later, Ukraine still can’t enforce those restrictions. The crisis threatens national security, creates intelligence vulnerabilities, and puts Ukraine’s post-war recovery at risk as debt-trapped veterans return to civilian life.

When presidential decrees hit legal walls

Zelenskyy’s April 2024 decree banned military personnel from gambling sites, but military commanders have no legal authority to add soldiers to Ukraine’s registry, restricting gambling access. Ivan Rudiy, head of the Commission for Regulation of Gambling and Lotteries (KRAIL), told Glavcom the order contains a fatal flaw.

As of 24 July 2024, Ukraine’s self-restriction registry contained 8,257 people—99% who voluntarily banned themselves, with 81% choosing the maximum three-year restriction.

The registry grew sixfold after KRAIL launched an online application form in July 2023, jumping from 367 registrations in the first half of 2023 to 2,200 in the second half.

But voluntary self-restriction can’t address soldiers whose addiction has progressed beyond self-awareness.

National security meets personal catastrophe

“Gambling takes advantage of this vulnerability by deliberately targeting military personnel, using Armed Forces symbols in online casinos,” Petrychenko wrote in his petition. He warned that Russian online casinos accessing Ukrainian soldiers’ personal data created national security threats alongside financial devastation.

One Border Guard fighter told Kyiv Post that systematic gamblers comprised “up to 10 percent” of his unit, though participation increased during major sporting events. Ivan Zadontsev, press officer for the Aidar battalion, told AFP about one soldier who won 2.5 million hryvnia ($60,000) only to gamble it away immediately.

Military psychologist Andrii Kozinchuk noted that frontline troops earning substantially above civilian wages face particular vulnerability to gambling’s appeal. “You feel as if you’ve discovered a new source of income and will continue to earn money,” he explained regarding the serotonin rush that drives addiction.

The addiction follows soldiers into recovery. Iryna Sysoyenko, president of the All-Ukrainian Association of Physical Medicine, Rehabilitation and Balneology, wrote in Ukrainska Pravda that rehabilitation centers see soldiers continuing to gamble during physical recovery.

Racing to build an infrastructure

KRAIL blocked nearly 2,000 unlicensed gambling websites in 2024 and negotiated with Meta and Apple to remove gambling advertisements and unauthorized apps. The regulator wants to conduct a national sociological study targeting military personnel and veterans as respondents. Still, Rudiy acknowledged that “conducting such research is significantly complicated by Russia’s full-scale armed aggression.”

Against this industrial-scale crisis, volunteers distributed 4,000 financial literacy books to military units in 2025. Soldier and theater director Kyrylo Lukash, who coordinates the Cultural Forces initiative built on their 2023 “Book to the Front” program, explained that service members themselves selected titles, including “Thinking, Fast and Slow” by Daniel Kahneman and “The Richest Man in Babylon” by George Clason.

“Soldiers with call signs Banker, Financier and similar chose the books,” Lukash said. The initiative operates through gatherings of 10-20 people with lectures and performances, followed by individual conversations.

Sysoyenko emphasized the urgency of developing proper treatment: “We must research international experience, develop appropriate methods and protocols, engage specialists, and most importantly—adapt methods to our needs, our reality, and our people.” She noted that in the United States, gambling disorder prevalence among veterans reaches 10.7%.

Stakes beyond individual soldiers

Veterans carrying gambling debt into civilian life threaten Ukraine’s post-war economic recovery. This is the threat Petrychenko died trying to prevent: debt-trapped soldiers become vulnerable to Russian intelligence exploitation, turning personal financial crises into national security liabilities.

Petrychenko’s warning received 25,000 signatures. The response was 4,000 books—a well-meant but tiny gesture against a crisis in which soldiers gamble away more than their nation can donate to defend itself.

Belgian Ambassador Luc Jacobs sat in a Kyiv conference room on 17 October at the “Money for Victory” conference organized by the International Centre for Ukrainian Victory (ICUV) and the National Interests Advocacy Network (ANTS), defending his government’s position to a room full of skeptical Ukrainian advocates.

Via video from Washington, D.C., British economist and financial markets analyst Timothy Ash wasn’t buying it.

Europe froze €183 billion ($196 billion) in Russian central bank assets in April 2022—the decisive legal step that cut Moscow off from the money. Since then, Belgium has collected €1.7 billion ($1.8 billion) in taxes on windfall profits from those frozen assets, money it pledged to use for Ukraine aid.

However, the bulk remains locked in Brussels, blocked by Belgium’s insistence that other EU members must first guarantee they’ll share litigation risks. As Ash bluntly explained, the problem is that Belgium is closing a barn door that’s been open for three years.

“There’s zero evidence anyone moved reserves”

“The decisive message was already sent in April 2022 when assets were first immobilized,” Ash said. “Russia will never recover these resources unless it pays reparations.”

He pointed to the $7 trillion global foreign exchange reserves in European and American markets. China didn’t pull its money. Saudi Arabia didn’t either. Major reserve holders “don’t trust each other,” and more importantly, there are no liquid markets capable of absorbing that volume.

Belgium’s fears of retaliation? Economically illogical, Ash argued. If countries like Saudi Arabia sold European or US bonds in protest, global interest rates would rise, growth would fall, and oil prices would collapse—” which will massively hurt the Saudi Arabian budget.”

Ambassador Jacobs held his ground. “We have to stay within the law because that is the big principle that you are fighting for as well,” he said, noting concerns about maintaining trust in the European financial system.

The decision must be “legally tight, legally sound” to avoid causing Europe more harm than it inflicts on Russia.

Five days later, nothing had changed.

Hundreds of billions in limbo

The standoff centers on Euroclear, a Brussels-based securities depository holding €183 billion ($196 billion) in immobilized Russian central bank assets. Belgium, where Euroclear operates and the government has a 12% stake, demands that other EU members guarantee they will share litigation risks before the assets back loans to Ukraine.

As reported by Euractiv on 22 October, Belgium, along with Luxembourg and the European Central Bank, remains “considerably more cautious” about the EU’s proposed €140 billion ($150 billion) reparation loan mechanism. According to EU diplomats, the Commission’s three-page briefing note to EU ambassadors failed to address Belgium’s demand for “strong and clear text” that “needs to be legally binding” on risk-sharing.

Russia holds blocked foreign accounts worth roughly a quarter-trillion rubles that could be nationalized in response, potentially creating capital holes for Euroclear. Belgium’s government has stated that breaching international financial rules would expose Belgium and the EU, as investors might reconsider investments in European markets.

But Ash challenged conference participants directly: “If you don’t want to do this, tell us exactly how you propose to fill the hundred billion a year funding requirement of Ukraine.”

Ukraine makes its case

Ukrainian officials argue this isn’t charity but justice. Mykola Yurlov from Ukraine’s Ministry of Foreign Affairs, outlined what Ukrainian officials characterize as a legally sound mechanism: a “reversible transfer” rather than confiscation, where the transferred amount would be subtracted from the over $1 trillion Russia owes Ukraine through a “set off” mechanism under international law.

He emphasized that highly qualified international law professors have written detailed legal memoranda demonstrating the permissibility of this approach through the counter-measures doctrine.

The November 2022 UN General Assembly resolution, supported by 94 states, affirmed that Russia must bear legal consequences for its aggression, including compensation for all damage. Ukraine has since launched a Register of Damage with more than 60,000 claims registered.

Negotiations concerning a Claims Commission were recently finalized in The Hague, with a convention establishing the Commission set for adoption on 16 December.

But Iryna Mudra, Deputy Head of the Office of the President of Ukraine, described the reparation mechanism as “a bridge between immediate needs and the full transfer of frozen assets to Ukraine”—and then outlined demands that would challenge standard international lending practices.

The cost of delay

According to Ash’s estimates, Ukraine requires $100-150 billion annually to sustain its defense and economy. Nonetheless, the G7’s existing Economic Resilience Activity (ERA) loans program, which Euroclear has already funded with €1.6 billion ($1.7 billion) in its third tranche, provides only $50 billion total using interest income from frozen assets rather than the principal.

The proposed reparation loan would tap into the €140-175 billion ($150-187 billion) in matured Russian assets at Euroclear, providing multiyear funding certainty. Germany’s Chancellor Friedrich Merz backed the plan as an interest-free loan repayable only once Russia compensated Ukraine for war damages, driven partly by fears that Germany would otherwise shoulder Europe’s Ukraine costs alone.

Ash said, warning that if Ukraine loses due to insufficient funding, European countries like Belgium would face immediate defense spending increases to 5% of GDP—up from current levels of 2.3-2.7%—resulting in higher interest rates, lower growth, and increased social unrest.

Russia has caused more than $1 trillion in damage to Ukraine since 2014, according to European Investment Bank calculations.

A dangerous vulnerability

Andriy Mikheiev, another Ukrainian legal expert at the conference, highlighted a separate structural problem: EU sanctions against Russia require unanimous renewal every six months. If even one member state—and participants noted Hungary’s consistent opposition to Ukraine support—votes against renewal, Russian assets would be “transmitted back to Russia” within a month.

He pointed out that EU guidelines officially recognize an alternative approach where sanctions automatically continue unless evidence shows objectives have been reached, requiring only qualified majority voting to lift them.

The six-month renewal cycle means both the existing ERA loans program (which uses only windfall profits from frozen assets) and any future reparation loan face recurring political risk. “Each half of the year shall be a big surprise, not in a good way surprise, for Ukraine, for the European Union, for the international community,” Mikheiev warned.

Stuck in neutral

European Pravda reported on 21 October that Belgium agreed not to block the EU idea, with EU leaders asking the European Commission to draft a concrete proposal. However, Euractiv noted that the Commission’s briefing note failed to quell Belgium’s concerns.

Yurlov concluded his conference remarks by framing the issue as fundamentally political rather than technical: “There is no impediment from the legal or economic standpoint to address this reparation loan. The only question is the political will. What we’re asking about partners is to be at least half as brave as our defenders are sacrificing their lives not only for Ukraine but for the future of Europe and the world.”

The asymmetry remains stark: Europe has already channeled €3.55 billion ($3.8 billion) in windfall profits to the European Fund for Ukraine through the ERA loans program during 2024 alone. Belgium collected €1.7 billion in taxes.

Yet, the underlying principal of €140-175 billion sits frozen, blocked by demands for guarantees against consequences that, according to Ash’s analysis, already occurred when Europe made its choice in April 2022.

An explosion ripped through Hungary’s largest oil refinery hours after a blast hit a Russian-owned Romanian facility—both processing Russian crude on the same day Ukraine’s drones struck deep inside Russia.

The twin incidents hit countries that maintained Russian energy dependence while blocking Ukraine aid. These countries now face the consequences as Hungary loses critical refining capacity and alternative supplies dry up across the region.

Százhalombatta fire knocks out significant capacity

A fire broke out at MOL’s Danube Refinery in Százhalombatta late on 20 October, engulfing the facility’s largest processing unit, which has an annual capacity of 3 million tonnes. Reuters reported that the unit processes over 40% of the refinery’s crude intake, making it critical to Hungary’s fuel supply.

On Tuesday’s press conference, Krisztián Pulay, the company’s Director of Operations, said restoration could take “the next few days.” However, Erste Bank analyst Tamás Pletser estimated the capacity loss could persist for months.

Hungarian business outlet Világgazdaság reported that authorities are examining technical failure, human error, and the possibility of “organized action.”

The facility processes primarily Russian crude delivered via the Druzhba pipeline—a rarity in the European Union, where most member states slashed Russian energy imports following Moscow’s 2022 invasion of Ukraine.

Same-day explosion in Romania

Hours earlier that Monday, an explosion struck the Petrotel-Lukoil refinery in Ploiești, Romania. The Russian-owned facility, one of Romania’s largest with 2.5 million tonnes annual capacity, was offline for scheduled maintenance when the blast injured a 57-year-old worker.

Ukraine has not commented on either incident. The Kyiv Independent reported that Ukrainian officials declined to address the explosions or a separate drone strike that same day on Russia’s Novokuybyshevsk refinery.

Ukraine’s refinery campaign

This comes as Ukraine has spent months targeting Russian oil infrastructure. Between August and September alone, Ukrainian forces confirmed 23 successful strikes on Russian refineries, focusing on atmospheric vacuum distillation units that can halt production entirely.

Ukrainian drones have reached facilities over 1,300 kilometers inside Russia, including repeat strikes on the Gazprom Neftekhim Salavat refinery in Bashkortostan and attacks on the Novokuybyshevsk facility in Samara Oblast.

Hungarian Foreign Minister Péter Szijjártó called the attack on the pipeline—which supplies over 40% of Hungary’s oil—an assault on the country’s sovereignty and banned the Ukrainian drone commander from the Schengen area.

Poland recently refused to extradite a Ukrainian citizen accused of involvement in the 2022 Nord Stream pipeline sabotage, with Prime Minister Donald Tusk stating it was “not in Poland’s national interest.” Szijjártó condemned the decision as giving “advance permission for terrorist attacks in Europe.”

Serbia’s compounding crisis

The MOL fire arrives at a critical moment for Serbia. After multiple delays, US Treasury sanctions targeting the country’s NIS oil company—45% owned by Gazprom Neft—took effect on 8 October.

The sanctions block NIS from importing crude oil. Without new supplies, Serbia’s Pančevo refinery—the country’s only significant fuel processing facility—could be shut down within one to six weeks, according to energy analysts.

Erste’s Pletser warned that the MOL fire makes Serbia’s situation “even more dire.”

Serbia also faces pressure on natural gas. Gazprom declined to renew a long-term supply contract, offering only deliveries through year-end. President Aleksandar Vučić stated Washington wants Serbia to nationalize NIS and Gazprom-owned gas infrastructure to lift sanctions, but called such action “the last thing I would do.”

Pletser noted that Vučić faces a difficult choice: maintain Russian ties and risk energy paralysis, or break with Moscow and confront his nationalist voter base.

Strategic vulnerability

Countries that built energy systems around Russian supplies now face rapid collapse. By May 2025, Hungary imported 90% of its gas and 65% of its oil from Russia despite having access to the Adria pipeline from Croatia, which Croatian operator JANAF confirmed can transport 14.3 million tonnes annually—exceeding MOL’s refinery needs.

According to the report “The Last Mile. Phasing Out Russian Oil and Gas in Central Europe”, MOL contracted 2.2 million tonnes via Adria in 2024 while continuing to process discounted Russian crude: “...however, only 968 thousand tonnes were actually delivered...”

The European Union plans to phase out all Russian gas, oil, and coal imports by 2027-2028, though Hungary has threatened to veto sanctions if its Russian oil exemption is revoked.

Orbán blocked or delayed multiple billion-dollar EU aid packages, while Serbia refused to join Western sanctions against Russia.

As Russia continues its systematic campaign targeting Ukraine’s energy grid—destroying over 50% of pre-war generating capacity in 2025—the question of energy vulnerability has taken on new dimensions across the region.