EU agrees hefty $105bn Ukraine loan without using Russian assets

According to Antonio Costa, president of the EU Council, EU leaders have agreed to give Ukraine an interest-free loan to meet its military and economic needs over the next two years.

The leaders made the decision early on Friday to use frozen Russian assets to pay for Ukraine’s defense of Russia, according to diplomats.

Volodymyr Zelenskyy, the president of Ukraine, thanked the EU for its loan, which “truly strengthens” Kyiv’s defense.

Zelenskyy said on X that “this is significant support that truly strengthens our resilience.” He continued, “It is crucial that Russian assets remain immobilized and that Ukraine has a financial security guarantee for the foreseeable future.”

There is a deal, we say. The decision to support Ukraine for 2026-27 with 90 billion euros [105.5%] was approved. In a post on social media early on Friday, Costa said, “We committed, we delivered.”

After EU leaders worked hard into Thursday night’s agreement, Costa did not reveal the source of the funding.

However, an early draft of the summit’s conclusions, which was spotted by the Reuters news agency, stated that they would be made by the bloc’s controversial plan to use frozen Russian assets as a loan to support Ukraine’s war effort, secured by the EU budget.

EU governments and the European Parliament will continue to talk about establishing a loan to Ukraine based on assets held by the Russian central bank.

According to the text, the agreement on Friday won’t have an impact on Hungary, Slovakia, and the Czech Republic’s financial obligations, which both declined to contribute to financing Ukraine.

After EU leaders decided to borrow money to pay for Ukraine instead of using Russia’s frozen assets, Kirill Dmitriev, Russia’s special envoy for investment and economic cooperation, said on Friday that “law and sanity prevailed.”

Dmitriev, who mentions European Union Commission President Ursula von der Leyen, said on X that “Major BLOW to EU warmongers led by failed Ursula … voices of reason in the EU BLOCKED the ILLEGAL use of Russian reserves to finance Ukraine.

Once Moscow repairs its war damage, Kyiv will only be able to repay the EU loan based on joint borrowing. According to the text, the EU has reserved the right to use the frozen assets to pay off the loan, but the Russians will continue to do so until then.

One unnamed EU diplomat told Reuters, “It’s good in the sense that Ukraine will receive funding for two years.

Leaders had flocked to the decision, which came after hours of discussions about the technical and legal details of a loan based on frozen Russian assets, which diplomats claimed were too complicated or politically difficult to resolve at this point.

A second EU diplomat said, “We have gone from saving Ukraine to saving face, at least among those who have been pressing for the use of the frozen assets.”

The main challenge in using Russian money was to provide sufficient guarantees against financial and legal retaliation from Moscow for Belgium, where 185 billion euros ($217 billion) of the total 210 billion euros ($246 billion) of frozen assets are held.

Should the Kremlin’s plan to use its assets go ahead, it had stated that it would file legal suits against Russia and seize foreign assets.

divided Europe

Analysts had predicted that using frozen Russian assets as the only viable option for EU funding of Ukraine’s war effort prior to Friday’s decision. German state assets, which were not even taken during World War II, would be an unprecedented development, according to the proposal.

German Chancellor Friedrich Merz had warned that the chances of reaching an agreement remained “50-50” prior to Thursday’s meeting.

Bart De Wever, the prime minister of Belgium, had previously expressed his concern over the legal and financial risks to the European Parliament because he had previously argued that Belgium might be required to pay compensation to Russia if courts later determined that using the frozen assets was against the law.

Belgium demanded assurances that Russian assets held outside of Belgium would also be used, as well as binding commitments from other EU states to cover all potential liabilities.

Some nations, like Germany and the Netherlands, said they were willing to back up the loan, while others, like Italy and Bulgaria, resisted.

Source: Aljazeera