EU prepares 40 billion euros of loans for Ukraine without US participation - FT
Kyiv • UNN
The EU plans to provide Ukraine with up to 40 billion euros in new loans by the end of the year without the participation of the United States. This decision follows the failure of the G7 plan to use frozen Russian assets to help Ukraine.
The EU is preparing to provide up to 40 billion euros in new loans to Ukraine by the end of the year, regardless of US participation, after the G7 plan to use frozen Russian assets to help Ukraine "failed," the Financial Times reports, UNN writes.
Details
According to three people involved in the talks, the unilateral push came amid concerns in Brussels that Hungary would prevent the bloc from providing the guarantees the United States needs to participate in the frozen assets plan.
The government of Hungarian Prime Minister Viktor Orban, the EU's most pro-Russian leader, tried to postpone a decision on the frozen assets plan until after the November 5 US presidential election, the newspaper reports.
"But Brussels should start working on any alternative within the next few weeks, as such a move would depend on the powers that expire at the end of the year," the publication writes.
The funds are reportedly intended to support the financial stability of Ukraine, which, according to Kyiv and the IMF, will face a $38 billion financing gap in 2025.
According to a draft legal proposal seen by the FT, the EU will raise an unspecified number of billions in loans for Ukraine by the end of 2024.
Such a step, an extension of the existing aid program, would require only majority support, not unanimity, which would deprive Budapest of its veto power.
The final amount may vary from 20 to 40 billion euros and will be set by the European Commission after consultation with member states, officials said.
"We can always act on our own," the EU official said.
While the original plan - involving the United States - remains the European Commission's plan, officials say they need an alternative if Budapest maintains its veto until after the US elections, the newspaper writes.
In June, G7 leaders agreed to provide Ukraine with a $50 billion loan to be repaid from future earnings on some 260 billion euros of frozen Russian foreign exchange reserves, most of which are held in Euroclear, Belgium's central securities depository.
According to this plan, the EU and the US will each commit about $20 billion, and the remaining $10 billion will be shared by the UK, Japan, and Canada.
But the United States, in order to ensure a steady stream of revenue to service the loan, demanded guarantees to ensure that Russian assets, most of which are in Europe, would remain frozen.
The European Commission, for its part, has proposed extending the bloc's sanctions blocking Russian assets from the current six-month period to 36 months to provide greater legal certainty. Other proposed options include extending the sanctions for five years.
However, Orban, who has vetoed EU support for Ukraine in the past, is currently blocking such an extension, according to people familiar with his thinking.
A Hungarian government official told EU ambassadors in Brussels on Monday that the issue will have to be resolved after the US election, according to two sources with knowledge of the discussions.
As an alternative, according to the publication, the EU is now considering issuing loans under the existing financial support package, which expires at the end of the year. The plan would include an increase in the bloc's total borrowing and would be backed by the EU's general budget.
The EU plan, according to the newspaper, provides for a portion of the $20 billion that was planned to be received from Washington under the original G7 proposal if the Biden administration fails to provide a loan so close to the election. Brussels officials hope that Washington will eventually provide the funds.
Brussels, if it decides to disburse the loans unilaterally, reportedly has to start working within the next few weeks to clear all the necessary legislative hurdles in time, as the support package for Ukraine expires at the end of the year.
"It is urgent to approve the proposals by the end of October so that the Union's loan can be unblocked by the end of 2024 for future tranche payments," the proposal says.
The proposal, as outlined, would ultimately still use the proceeds from the frozen assets, estimated at €2.5-3 billion a year, to repay the loan. Currently, this income is channelled to Ukraine through the EU budget.
