E.U. to loan Ukraine up to $39 billion backed by frozen Russian assets (original) (raw)

BRUSSELS — The European Union will provide a loan of up to 35 billion euros (about $39 billion) to Ukraine backed by the windfall profits from frozen Russian assets, European Commission President Ursula von der Leyen said Friday, after a plan from the Group of Seven nations to use Russian assets to raise funds for Ukraine stalled.

The commission, the E.U.’s executive branch, has adopted proposals to enable the bloc to grant Ukraine the loan backed by the Russian profits as part of the broader G-7 plan, and the money will “flow straight into” Ukraine’s budget, von der Leyen said on a trip to Kyiv.

“This is a huge step forward,” she told a news conference alongside Ukrainian President Volodymyr Zelensky. “We should make Russia pay for the destruction it caused. … We understand the tremendous financing needs created by the war.”

The G-7 nations had agreed to tap frozen Russian assets to provide Ukraine with $50 billion — based on a mechanism that would use the interest and profits from the assets — with the United States, the European Union and others each expected to contribute their relative share. But the full package has yet to come together.

“We are doing our share now,” von der Leyen said Friday. “I am absolutely confident that others will also do their share. For us, what’s important is that we are fast because of the urgency.”

Most of the nearly $300 billion in frozen Russian assets are held in Europe.

Washington had sought safeguards that it wouldn’t be left on the hook for loans if E.U. sanctions were to be loosened, unfreezing the assets. A particular concern is member state Hungary and its Moscow-friendly prime minister, Viktor Orban.

At present, the E.U. must get Hungary on board every six months for unanimous sanction renewal. The United States has been pushing for a longer renewal period, but that would require E.U. unanimity.

The new loan plan will need approval from a majority in the 27-nation bloc and from the European Parliament by the end of the year.

“That means there is no veto for Orban or any other member of the E.U.,” said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics.

He described the European move as “a big deal” because it essentially takes the reins of a plan intended to involve the United States and other contributors by issuing debt and providing a bigger E.U. share than expected.

The move sent a message to Ukraine that “we’ve got your back” and could be an effort to shield against political winds of change in Washington, Kirkegaard said. “It certainly is not only an insurance against a Trump presidency, but also an insurance against future hiccups” such as congressional delays, he added.

The European loan is smaller than the 50billionagreedtoundertheG−7planbutwillproviderelieftoUkrainethatcouldhelppluganexpectedbudgetgapofatleast50 billion agreed to under the G-7 plan but will provide relief to Ukraine that could help plug an expected budget gap of at least 50billionagreedtoundertheG−7planbutwillproviderelieftoUkrainethatcouldhelppluganexpectedbudgetgapofatleast35 billion for next year.

“What is very clear is that we have been talking about this with our G-7 partners intensively in the run-up to the [G-7] summit mid-June, but also thereafter, trying to find ways in which everybody feels sufficiently comfortable,” said a senior Commission official, hinting at some of the tensions. “And there is no secret that it is especially the sanction regimes which some have had concern about.”

She said she was optimistic that the others would come around. “I would truly hope that it’s not G-7 minus, but rather G-7 plus,” she said in a briefing for reporters given on the condition of anonymity in line with European Commission rules.

Zelensky said Friday that the funds would help with spending on air defense systems produced outside Ukraine, as well as on the country’s energy system and bomb shelters.