The European Union (EU) is preparing to allocate up to €40 billion in new loans to Ukraine by the end of the year without the participation of the United States. Brussels is taking such a step due to fears that Hungary will disrupt the plan of the "Big Seven" to use frozen Russian assets to help Kyiv.
This is reported by the Financial Times (FT) with reference to sources.
According to a draft proposal seen by the FT, the EU will provide Ukraine with an unspecified number of billions of dollars in loans until the end of 2024.
Such a move, which expands the existing aid program, would require majority support rather than unanimity, eliminating Budapestʼs veto power.
The final amount may range from €20 billion to €40 billion and will be set by the European Commission after consultations with EU member states.
Why is this important?
In June, the leaders of the "Big Seven" countries agreed to provide Ukraine with a $50 billion loan, which should be repaid with future earnings from frozen Russian gold and currency reserves, most of which are kept in Euroclear.
According to this plan, the EU and the USA will each provide $20 billion, and the remaining $10 billion will be shared between Great Britain, Japan and Canada.
But the US, in order to ensure a steady flow of income to service the loan, wanted guarantees that would ensure the freezing of Russian assets, most of which are located in Europe.
The European Commission, in turn, has proposed extending the blocʼs sanctions, which freeze 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, Hungarian Prime Minister Viktor Orbán, who has repeatedly vetoed EU support for Ukraine in the past, is currently blocking such an extension of sanctions, FT sources say.
A representative of the Hungarian government told EU ambassadors in Brussels on September 16 that the issue would be considered after the US elections scheduled for November.
The EUʼs new plan will ensure the provision of $20 billion that was supposed to come from Washington under the original G7 proposal, if the administration of US President Joe Biden is unable to provide the loan so close to the election. Brussels officials hope that Washington will still provide the funds, thus reducing the risks for the EU.
If a decision is made to grant the loan without US participation, Brussels must begin work in the next few weeks to overcome all the necessary legislative hurdles in time, as the Ukraine support package expires at the end of the year.