EU Council clears 90 billion euro loan to Ukraine; arms purchases from third countries only in case of ‘urgent need’

Brussels – After several weeks of deadlock, a sense of urgency prevails among EU capitals regarding the 90 billion euro loan to Ukraine: yesterday (5 February), the Cypriot Presidency of the EU Council managed to summarise the requests of the 27 in a compromise text, and in particular to reconcile French insistence on the principle of Buy European with the need to quickly secure the weapons that Kyiv needs on the battlefield. The text approved by the member states grants certain exemptions and stipulates that Ukraine may purchase products from third countries only “in cases of urgent need and where equivalent products are not available in Europe.”

The mega-loan, as indicated by EU heads of state and government in December, will be financed through EU loans on the capital markets and will be guaranteed by the EU budget. Kyiv will only be required to repay it after Russia has paid war reparations. Given the opposition of Hungary, Slovakia, and the Czech Republic, the decision was taken through the enhanced cooperation procedure with the participation of 24 Member States. “I welcome this important step in providing €90 billion in financing to Ukraine, just three weeks after we put forward our proposal.

I’m now looking forward to the Parliament’s position as well,” said European Commission President Ursula von der Leyen in a post on X, stressing that this “is a powerful symbol of our ironclad solidarity with Ukraine as we approach four years since Russia’s full-scale invasion began.”

Of the 90 billion for the next two years, 30 billion will be allocated to macroeconomic support and implemented through the EU instrument for Ukraine, while 60 billion will be used to support Ukraine’s capacity to invest in defence industrial capabilities and purchase military equipment. As for the first credit line, the one for economic assistance, it will be framed within a financing strategy prepared by the Kyiv government and approved by the member states. The financing, the EU Council emphasises in a statement, “will be linked to strict conditions on Ukraine’s side, such as adherence to the rule of law, including the fight against corruption.” 

The main sticking point, however, was the remaining two-thirds of the total, dedicated to defence against Russian aggression. The 24 member states stated that weapons and military equipment should “in principle” be procured only from companies in the EU, Ukraine, or EEA-EFTA countries (Iceland, Liechtenstein and Norway). However, the Council has provided for a series of targeted derogations in cases where such products do not exist or are not available in those countries “in the quantities required and with delivery times commensurate with the urgency of the situation and the immediate operational needs of Ukraine,” or if “the delivery times for such products are significantly shorter than those for products” from the EU and EEA-EFTA countries. 

In such cases, the Council has established two categories of third countries that may be directly associated with the support loan to Ukraine for specific defence products. Those  that have concluded a bilateral agreement with the Union under the SAFE regulation, the 150 billion euro instrument for defence investment loans, and those that “have entered into a security and defence partnership with the EU, have committed to provide a fair and proportionate financial contribution to the costs arising from borrowing, and which are providing significant financial and military support to Ukraine.”

The Council and the European Parliament will now negotiate the regulation implementing the mega-loan to Ukraine. The Council is also expected to request, through a written procedure, the European Parliament’s approval of an amendment to the current Multiannual Financial Framework to ensure financial assistance from the EU budget.