EU approves legal framework for €90 billion loan to Ukraine: sets limits for military procurement from third countries
Kyiv • UNN
The EU Council has approved a legal framework for providing Ukraine with financial support of 90 billion euros, with the exception of the Czech Republic, Hungary, and Slovakia. The funds will be directed to budget support and defense needs, and the first payment is expected in early Q2.
The EU Council has approved its position on the legal framework for providing Ukraine with 90 billion euros in financial support, backed by the EU budget, without the participation of the Czech Republic, Hungary, and Slovakia, outlining limits for military and defense procurement from third countries within the loan, the European institution reported on Wednesday, writes UNN.
Today, the Council (EU) agreed on its position on the legal framework for implementing the European Council's agreement to provide Ukraine with a 90 billion euro loan for 2026-2027. The Council (EU) is now seeking to quickly reach an agreement with the European Parliament to allow the disbursement of the first payment at the beginning of the second quarter of this year.
The Ukraine Support Loan, as stated, will be specifically aimed at supporting Ukraine's overall budget and defense needs.
As also agreed by the European Council, the loan will be financed by EU borrowing on capital markets and will be secured by the EU budget. The loans will become repayable only after Russia pays war reparations to Ukraine. In addition, the funding will help strengthen European and Ukrainian defense industries, the EU Council noted.
"Today's decision was adopted under the enhanced cooperation procedure with the participation of 24 member states," the European institution stated.
Financing instruments
Under the proposed framework, the EU will provide Ukraine with funding in two ways:
- 30 billion euros will be provided as macroeconomic support to Ukraine, channeled through macro-financial assistance (MFA) or implemented through the Ukraine Facility, a specialized EU instrument for providing Ukraine with stable and predictable financial support;
- 60 billion euros will be used to support Ukraine's ability to invest in defense industrial capacities and procure military equipment. The funding, it is noted, "will provide Ukraine with crucial and timely access to defense products from both Ukrainian and EU defense industries."
"The financial and economic assistance available under the loan will be accessible in accordance with Ukraine's financial needs, as defined by a financing strategy to be prepared by Ukraine itself. The Council (EU) will have to approve this strategy after an assessment by the European Commission," the EU Council stated. "In all cases, funding will be linked to strict conditions on Ukraine's part, such as adherence to the rule of law, including the fight against corruption."
Military and defense procurement
Defense products should in principle be procured only from companies in the EU, Ukraine, or EEA-EFTA countries. If Ukraine's military needs require urgent delivery of defense products not available in the EU, Ukraine, or an EEA-EFTA country, a number of specified exceptions will apply.
In addition, the EU Council's mandate provides that third countries, other than Ukraine or EEA-EFTA members, may be directly associated with the Ukraine Support Loan for specific defense products.
In this regard, it is reported that the mandate distinguishes between two categories of third countries:
- countries that have concluded a bilateral agreement with the EU in accordance with the SAFE regulation – an EU financial instrument that helps member states invest in defense. The association must be set out in a delegated act for each such third country, as well as detailing the products that can be procured from the industry of that country;
- countries that have concluded a security and defense partnership with the EU, have committed to providing a fair and proportionate financial contribution to cover borrowing costs, and provide significant financial and military support to Ukraine. The association must be set out in an implementing act of the EU Council, which will also detail the products that can be procured from the industry of that country.
Debt servicing costs
"To ensure the most favorable loan terms and manage Ukraine's debt sustainability, interest costs on the loan are planned to be covered by the EU budget. This will not affect the budgetary contributions of the Czech Republic, Hungary, and Slovakia, which have decided not to participate in enhanced cooperation," the EU Council stated.
Next steps
"The EU Council will now seek the earliest possible agreement with the European Parliament on the final legal texts of the regulation on the implementation of the support loan and the regulation amending the Ukraine Facility," the statement reads.
As stated, it is also expected that "the EU Council will now request, through a written procedure, the European Parliament's consent to amend the current MFF (EU multiannual budget - ed.) regulation to guarantee financial assistance within the EU budget."
After all steps are completed, the European Commission, it is noted, "will be able to disburse the first payment at the beginning of the second quarter of this year."
EU ambassadors approved a €90 billion loan for Ukraine - media04.02.26, 16:49 • 4558 views
Addition
As reported, the proposal provides for a 90 billion euro EU support loan to Ukraine, which will be financed by joint EU borrowing on capital markets and guaranteed by the so-called "reserve" of the EU budget. This new instrument, if adopted, will provide military assistance and general budget support to Ukraine, as well as support Ukraine's defense industry and its integration into the European Defense Industrial Base.
EU countries agreed on financial assistance for Ukraine at a summit in December. It is expected that two-thirds of the funding will be directed to military expenditures, rather than ordinary budget support.