EU countries back €35bn loan to Ukraine

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EU countries have approved providing Ukraine with a loan of up to €35bn before the end of the year as part of a G7 plan to fund Kyiv’s defence against Russian aggression.

A majority of EU ambassadors on Wednesday backed the issuance of a loan guaranteed by the bloc’s common budget, according to people familiar with the matter. The decision comes after months of wrangling over how to structure their share of a $50bn plan by the G7 to support Ukraine.

The option of raising money against the EU budget was announced by European Commission President Ursula von der Leyen when she travelled to Ukraine last month, as a way to circumvent objections from countries opposed to further aid for Kyiv.

Under the G7 plan, the entirety of the $50bn loan will be repaid by profits from Russian state assets frozen in the west in response to Moscow’s full-scale invasion of Ukraine. More than €200bn of those assets are immobilised in the EU.

It remains unclear whether the US will be able to join the G7 scheme and reduce the EU’s share from €35bn. The UK, Canada and Japan are also part of the G7 fundraising effort. 

Washington had premised its participation in the G7 loan on the EU extending the length of its sanctions regime from 6 months to 36 months in order to guarantee that the Russian assets remained frozen and put the repayment scheme on a more predictable footing.

“The scale of our participation depends on the strength of EU assurances that the Russian reserves will remain immobilised” until Moscow pays for the destruction it has carried out in Ukraine, a US official said.

But Hungary and Slovakia on Wednesday blocked that change to the EU’s sanctions regime, casting the US participation into doubt, said two people familiar with the decision.

The leaders of Hungary and Slovakia have indicated their preference for former US president and Republican candidate Donald Trump to win the November 5 election. Trump has said that if he is returned to the White House, he would cease aid to Ukraine.

Malta abstained on the €35bn loan raising concerns over its neutrality, but the decision did not require unanimity. The European parliament will also need to approve the loan later this month.