The EU Council has agreed its position on the legal framework implementing a European Council agreement to provide a €90 billion loan to Ukraine for the years 2026-2027.
The aim is now for a speedy agreement with the European Parliament which will allow the first payment to be disbursed early in the second quarter of this year.
The Ukraine support loan is to help Ukraine address its urgent financing needs as Russia continues its war of aggression. The specific aim is to support Ukraine’s general budget and defence needs.
“The new financing will help ensure the country’s fierce resilience in the face of Russian aggression,” said Cyprus’ finance minister Makis Keravnos, for the EU presidency: “At the same time, we are sending a strong signal that the sovereignty and territorial integrity of states must be fully respected, in accordance with international law.”
The loan will be financed through EU borrowing on the capital markets and will be backed by the EU budget. The loans will become repayable only once Russia has paid war reparations to Ukraine. Furthermore, the financing will help strengthen the European and Ukrainian defence industries.
Under the proposed framework, the EU will make funding available to Ukraine in two ways:
- €30 billion will be provided as macroeconomic support to Ukraine, channelled via macro-financial assistance (MFA) or implemented through the Ukraine Facility, the EU’s dedicated instrument for providing Ukraine with stable and predictable financial support.
- €60 billion will be used to support Ukraine’s capacity to invest in defence industrial capacities and to procure military equipment. The funding will give Ukraine crucial and timely access to defence products from both the Ukrainian and EU defence industries.
The financial and economic assistance available under the loans will be made accessible in line with Ukraine’s financing needs, determined by a financing strategy to be prepared by Ukraine itself. The Council will need to approve this strategy following a Commission assessment.
In all cases, funding will be linked to strict conditions on Ukraine’s side such as adherence to the rule of law, including the fight against corruption.
Defence products should in principle only be procured from companies in the EU, Ukraine, or EEA-EFTA countries. Should Ukraine’s military needs require the urgent delivery of a defence product which happens not to be available in the EU, Ukraine or an EEA-EFTA country, a set of targeted derogations would apply.
In addition, the Council mandate provides that third countries other than Ukraine or EEA-EFTA members may be directly associated to the Ukraine Support Loan as far as specific defence products are concerned. The mandate distinguishes between two categories of third countries in that regard:
- Countries that have concluded a bilateral agreement with the Union under the SAFE regulation – the EU’s financial instrument to help member states invest in defence. The association would have to be laid down in a delegated act for each such third country, also detailing the products which could be procured from that country’s industry.
- Countries 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 association would have to be laid down in a Council implementing act, which would also detail the products which could be procured from that country’s industry.
To ensure the most favourable loan terms and to manage Ukraine’s debt sustainability, the interest cost of the loan is planned to be covered by the EU budget.
This will not have an impact on the budget contributions of Czechia, Hungary and Slovakia, who have chosen not to take part in the enhanced cooperation.
