This decision follows the collapse of a G7 plan to utilize frozen Russian assets to aid Ukraine.
Key Details:
- New Loan Package: The EU aims to provide significant financial support to Ukraine to address a financing deficit expected to reach $38 billion in 2025. The amount of this new loan package could range from €20 billion to €40 billion, pending consultations with member states.
- Unilateral Action: This move is being taken independently of the United States, primarily due to concerns that Hungary might block the bloc from guaranteeing US participation in the asset freeze plan. Hungary's government, led by Prime Minister Viktor Orbán, has shown pro-Russian tendencies and aims to delay a decision until after the November 2024 US presidential election.
- Circumventing Veto Power: The EU's strategy involves expanding an existing aid program, requiring only majority support rather than unanimity, thus bypassing potential veto power from Hungary.
- Time Constraints: The EU needs to act within the next few weeks to set up this alternative funding mechanism, as the current aid package for Ukraine is set to expire at the end of the year.
Original G7 Plan:
- The G7 had initially planned to provide Ukraine with a $50 billion loan, to be repaid with future earnings from about €260 billion of frozen Russian foreign exchange reserves.
- This plan included contributions from the EU, the US, the UK, Japan, and Canada, but has stalled due to the need for legal guarantees to keep Russian assets frozen.
Next Steps:
- The EU may issue loans within the existing financial support package for Ukraine, which involves increasing the bloc's total borrowing.
- The proposal emphasizes the urgency of adopting this new loan package by the end of October to enable future payments.
This move demonstrates the EU's commitment to supporting Ukraine's financial stability, particularly in the absence of cooperation from some of its own member states and amid global geopolitical challenges.
