EU Approves €90 Billion Loan to Ukraine, Bypassing Use of Frozen Russian Assets
In a crucial move, the European Union (EU) leaders have agreed to lend €90 billion (US$106 billion) to Ukraine to support its military and economic needs for the next two years. The decision came after intensive negotiations at a summit in Brussels, amid disagreements on using frozen Russian assets to fund the loan.
Background and Context
Ukraine's financing needs for 2026-2027 are estimated to be about €137 billion, of which the EU is expected to provide €90 billion. The decision to finance Ukraine was a key issue at the recent European Council summit. However, the proposal to use frozen Russian assets to finance the loan met with resistance, primarily from Belgium, and was eventually discarded. European Central Bank (ECB) President Christine Lagarde was confident that the EU leaders would find a way to support Ukraine, given the importance of the issue.
Key Developments
Following more than a day of talks, EU leaders finally agreed on a loan mechanism, bypassing the use of Russian assets. The loan will be secured against EU borrowing rather than Russian assets. The EU will issue the loan interest-free and it will be guaranteed by the EU budget. The decision was announced by EU Council President Antonio Costa, who stated on social media, We have a deal. Decision to provide €90 billion of support to Ukraine for 2026-27 approved. We committed, we delivered.
Implications and Reactions
The decision to lend Ukraine €90 billion not only covers two-thirds of the country's financial needs for the next two years but also bolsters Ukraine's position in ongoing peace talks. While this was not the preferred solution for some EU leaders, the fact that a resolution was reached at all has been viewed as a victory for the bloc.
However, Lithuania's President has expressed concern that the allocated funds may not be sufficient and that the EU might need to revisit the issue of financing Ukraine.
Current Status and Future Plans
While the frozen Russian assets remain blocked, the EU leaders have decided to freeze €210 billion worth of Russian sovereign assets deposited in European banks. These funds will be confiscated unless Russia pays war reparations, a prospect that many consider unlikely.
In addition, the EU is continuing to work on a bridge loan for Ukraine, indicating that a unanimous agreement on short-term supply could be possible. The European Council is also considering the use of Eurobond, a common European debt instrument, to aid Ukraine.
Despite the significant loan, Ukraine's President Volodymyr Zelensky has warned that more funds may be needed, indicating that the financial challenges for Ukraine are far from over.