On what terms the EU is granting Ukraine a €90 billion loan and how to receive these funds on time
On 14 January, the European Commission presented a package of legislative proposals on the basis of which Ukraine will be able to receive the already approved €90 billion loan this and next year.
As with the existing macro-financial support mechanisms, these funds will be provided in exchange for reforms.
Brussels plans to complete all the necessary preparatory work within six weeks since Ukraine could already face a shortage of funding in April both for key budget sectors and for the Armed Forces of Ukraine.
Read more abour whether the EU’s plans are achievable in the article by Tetiana Vysotska, a European Pravda reporter from Brussels: An action plan for €90 billion: how EU is preparing aid for Ukraine and what it will demand from Kyiv.
According to European Commission President Ursula von der Leyen, approximately two thirds, about €60 billion, out of the €90 billion loan will be allocated for military assistance to Ukraine, while the remaining roughly €30 billion will be provided as general budget support.
The "military" funds will be used according to the same logic that underpins the SAFE mechanism for financing joint European defence procurement. Using the loan funds, the EU will purchase equipment primarily in the EU, as well as in Ukraine and in EU partner states within the European Economic Area and the European Free Trade Association (for example, Norway or Switzerland).
However, if the necessary weapons or ammunition are not available either in the EU or in the specified partner states, they may still be purchased from other countries, for example, the United Kingdom or the United States.
Meanwhile, the €30 billion in budget support will be provided to Ukraine on the same terms, and in fact through largely the same methods and channels, as the macro-financial support under the Ukraine Facility. The core idea of EU budget financing for Ukraine can be summed up briefly: money in exchange for reforms.
The specific conditions for receiving these funds still need to be defined. At present, the European Commission notes that, in order to obtain them, Ukraine will have to implement reforms aimed at improving democratic processes, the rule of law and anti-corruption efforts.
Kyiv will be obliged to repay the loan only after and if Russia pays reparations for the damage and destruction caused by the war.
The loan to Ukraine will be guaranteed through the EU budget "headroom," as in the case of other financial assistance programmes for Ukraine implemented since 2023 (such as the Ukraine Facility mechanism and the macro-financial assistance loan under the G7-led Extraordinary Revenue Acceleration (ERA) initiative).
Interest on the loan for Ukraine will be covered by contributions from the EU member states participating in the loan (27 minus Hungary, Slovakia and Czechia).
Despite the fact that the EU has chosen to support Kyiv through borrowing, it has not ruled out that frozen Russian assets could eventually be used at some point.
"It is also very important for us to send a stark reminder to Russia that we reserve the right to make use of immobilised Russian assets," Ursula von der Leyen said on 14 January.
She expects that Ukraine will receive the first tranche of the loan as early as April.
It is expected that Members of the European Parliament will approve the Council of the EU decision "On granting authorisation for enhanced cooperation for the establishment of a loan for Ukraine" at the plenary session in Strasbourg on 19–22 January, after which it will be formally adopted by the Council of the EU (no problems expected, as only a qualified majority is required).