EU Leaders Agree to Significant Loan for Ukraine’s Needs

In a pivotal moment for support to Ukraine, leaders of the European Union have approved a substantial interest-free loan aimed at addressing the country’s military and economic challenges for the next two years. This decision comes after discussions on utilizing frozen Russian assets did not reach a consensus, according to diplomats late Friday.

“We have a deal. The decision to provide €90 billion ($106 billion) of support to Ukraine for 2026-27 has been approved. We are committed, and we have delivered,” celebrated EU Council President Antonio Costa through social media.

Financial Considerations and Alternatives

With high debt levels straining public finances across the EU, the European Commission had suggested leveraging frozen Russian central bank assets to secure the loan for Kyiv, considering joint borrowing against the EU budget as an alternative. Belgian Prime Minister Bart De Wever pointed out that the decision to proceed with a loan through borrowing rather than frozen assets helped prevent “chaos and division.” He stated, “We remained united,” following the lengthy discussions.

German Chancellor Friedrich Merz added that Ukraine would only need to repay the loan if Russia fulfills its reparations obligations for the war. He also noted that the EU retains the right to utilize immobilized Russian assets for repayment in the event that Russia fails to compensate.

Ukraine’s Financial Needs and Leadership’s Position

Ukraine has been estimated to require an additional €135 billion ($159 billion) to maintain essential operations over the next two years. At the summit’s opening, President Volodymyr Zelenskyy emphasized to EU leaders that utilizing Russian assets was essential. “Russian assets must be harnessed to defend against Russian aggression and to rebuild what was destroyed. It’s moral, it’s fair, and it’s legal,” Zelensky stated.

A draft from the summit, reviewed by Reuters, indicated that the funding would be sourced through capital market borrowing secured against the EU budget. Notably, the arrangement respects the financial responsibilities of Hungary, Slovakia, and the Czech Republic, which expressed reluctance to participate in financing Ukraine. Hungary, known for its pro-Moscow stance, had previously voiced opposition to the deal concerning frozen assets.

Ongoing Efforts and Complexity of Asset Utilization

Despite the current arrangement, EU governments and the European Parliament will continue working towards configuring a loan that includes access to frozen Russian central bank assets, as noted in the draft conclusions of the summit. The decision around funding has been framed by Poland’s Prime Minister Donald Tusk as a stark choice between “money today or blood tomorrow,” highlighting the urgency amidst Belgium’s hesitance regarding loans tied to Russian assets.

“In one respect, this is beneficial because it assures that Ukraine secures funding for the next two years,” commented one EU diplomat. This development follows extensive discussions among leaders regarding the complexities of a loan based on frozen Russian assets, which ultimately proved to be too intricate and politically sensitive to resolve at this time.

As one diplomat noted, “We transitioned from saving Ukraine to saving face for those advocating the use of frozen assets.” The primary challenge lay in securing adequate guarantees for Belgium, which harbors €185 billion out of a total of €210 billion of Russian assets in Europe, amidst concerns over financial and legal repercussions from potential Russian retaliation if funds were released to Ukraine.

In a parallel move, Russia’s central bank declared intentions to seek damages from European banks “for the unlawful blocking and utilization of its assets,” claiming $230 billion in damages from Euroclear. The Brussels depository housing the bulk of Russian assets has reportedly faced intimidation, as indicated by security officials.

Conclusion

The European Union’s decision to provide a significant interest-free loan to Ukraine underscores the bloc’s commitment to supporting the country amidst pressing economic needs. While challenges remain, this decision reflects a united front among EU leaders as they navigate complex financial and political landscapes.

• The EU approved a €90 billion interest-free loan for Ukraine for 2026-27.
• Discussions on using frozen Russian assets for this loan did not reach a consensus.
• Ukraine is estimated to need €135 billion in additional funding over the next two years.
• Germany emphasized repayment would depend on Russian reparations.