Roman Abramovich’s representatives believe the UK government changed the terms of the deal under which funds from the sale of Chelsea were to be used to help victims of the war in Ukraine.

Almost 17 months after Chelsea’s £2.5bn sale, a stalemate over where the funds should be spent means a proposed charitable foundation is yet to be established and proceeds remain frozen in a UK bank account belonging to Abramovich’s company Fordstam.

Abramovich is under UK government sanctions, with the sale of Chelsea made possible by a licence granted by the Office of Financial Sanctions Implementation on 24 May 2022. The text of the licence is not in the public domain, for reasons of data protection according to the Treasury, but sources close to Abramovich say it authorised the creation of a foundation with “exclusively humanitarian purposes supporting all victims of the conflict in Ukraine, and its consequences”.

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This language is consistent with Abramovich’s desires as expressed in a statement of 2 March 2022, in which he declared his willingness to sell Chelsea and use the money “for the benefit of all victims of the war in Ukraine”. It is significantly different, however, from the terms currently insisted on by the government.

The government wants the fund to support “exclusively humanitarian purposes in Ukraine”, a phrase used by the Department for Culture, Media and Sport in a unilateral declaration made after completion of the sale on 30 May 2022. This phrasing also conforms with the terms of an agreement with the EU over the redistribution of funds. Abramovich, a Portuguese citizen, is also under sanctions in the bloc.

A spokesperson for the Foreign Office, asked by the Guardian whether the phrasing of the unilateral declaration corresponded with the terms of the 22 May licence, said: “We’ve been clear since the sale of Chelsea FC went through that we’d only issue a licence that ensures the proceeds are specifically used for humanitarian purposes in Ukraine. We set that out in a unilateral declaration at the time and remain committed to that position.”

The government’s determination to use the funds solely within Ukraine relates to fears that a loosening of the remit could lead to money being given to Russia or used for other ends that would not directly benefit Ukrainians. The man chosen by Abramovich’s Chelsea to run the foundation, Mike Penrose, has previously said that the government had been offered a seat on the foundation’s board with a veto to stop any spending that might contravene sanctions.

The Guardian understands that the Charity Commission is yet to receive an application for a licence to establish the foundation. Fordstam retains control over the frozen funds, with ultimate sign-off of any transfer, and any attempt to seize the money by the UK government would prove politically fraught.

The Labour peer Lord Foulkes of Cumnock has written to the foreign secretary, James Cleverly, and the chancellor, Jeremy Hunt, calling on the government to speed up the creation of the foundation. “I understand that precautions must be taken to ensure that this money does not find its way back into Mr Abramovich’s pocket, but we can ill afford to leave this money unused,” he wrote. “The only barrier, as far as I can tell, seems to be bureaucracy, and it strikes me as ridiculous that we should let a matter of paperwork confound these efforts, when our Ukrainian allies overcome incredible adversity on a daily basis.”

Redress, an organisation that works to secure justice and reparations for victims of torture, has called on the government to issue new licences that would allow some of the Chelsea money to be distributed to established funds while the foundation is set up.

“Repurposing the funds from the sale of Chelsea FC is a huge opportunity for the UK government to have a lasting impact on the lives of victims of the conflict,” said Rupert Skilbeck, the director of Redress. “For it to work, there must be close consultation with survivor groups and civil society in Ukraine.

“There are several purpose-built international mechanisms who are ready and waiting to receive the funds and who have the skills to distribute the funds fairly and effectively. These include the Trust Fund for Victims, the Register of Damage created by the Council of Europe, to which the Netherlands has already pledged €1.5m, or the Global Survivors Fund, which supports survivors of conflict-related sexual violence.”