Ocean models at intermediate resolution (1/4 degrees), which partially resolve mesoscale eddies, can be seen as Large eddy simulations of the primitive equations, in which the effect of unresolved eddies must be parameterized. In this work, we propose new subgrid models that are consistent with the physics of two-dimensional flows. We analyze subgrid fluxes in barotropic decaying turbulence using Germano (1986, ) decomposition. We show that Leonard and Cross stresses are responsible for the enstrophy dissipation, while the Reynolds stress is responsible for additional kinetic energy (KE) backscatter. We utilize these findings to propose a new model, consisting of three parts, that is compared to a baseline dynamic Smagorinsky model. The three-component model accurately simulates the spectral transfer of energy and enstrophy and improves the representation of KE spectrum, resolved KE and enstrophy decay in a posteriori experiments. The backscattering component of the new model (Reynolds stress) is implemented both in quasi-geostrophic and primitive equation ocean models and improves statistical characteristics, such as the vertical profile of eddy KE, meridional overturning circulation and cascades of kinetic and potential energy. Ocean models at intermediate resolution contain missing physics term that accounts for the contribution of unresolved mesoscale eddies, which needs to be parameterized. Mesoscale eddies obey complex physics which should be accounted for when proposing a parameterization. Here we consider the interscale transfer of kinetic energy and enstrophy in a barotropic fluid and propose new subgrid models which capture this transfer. Our strategy is to split the subgrid contribution into three parts and propose a model for each term separately. This approach results in excellent a priori performance and improves online simulations. We demonstrate that our analysis of subgrid fluxes generalizes well across flow regimes: the new parameterization of energy redistribution improves barotropic, quasi-geostrophic and primitive equation ocean models. We propose a three-component subgrid model consistent with the physics of two-dimensional fluids using Germano (1986, ) decompositionThe new subgrid model accurately predicts the spectral transfer of energy and enstrophy and improves a posteriori experimentsA backscattering component (Reynolds stress) improves coarse-grid ocean models based on quasi-geostrophic and primitive equations