The European Union has announced a €35 billion loan to support Ukraine in the wake of Russia’s invasion. The loan will be backed by windfall profits generated from Russia’s frozen assets, estimated to be between €2.5 billion and €3 billion annually. These assets, held by Euroclear in EU territory, will serve as collateral for the loan and exempt Ukraine’s budget from repayments.
The loan initiative, part of a larger $50 billion plan with the G7, aims to provide immediate relief to Ukraine as it faces ongoing Russian aggression. The EU’s share of €35 billion is higher than originally planned, with negotiations ongoing to determine the final contribution from other allies. The Commission aims to establish the Ukraine Loan Cooperation Mechanism to manage the windfall profits and ensure repayments are met without burdening Ukraine or the G7.
While the loan proposal is subject to a vote in the Council, it is not subject to individual vetoes, raising hopes for a prompt agreement. The Commission plans to disburse the funds gradually throughout 2025 and closely monitor policy conditions to ensure proper use. However, concerns remain about Hungary’s potential veto on extending the renewal period for Russia’s frozen assets, which could impact the plan’s long-term predictability.
Overall, the EU’s loan to Ukraine is a significant step in providing critical financial support to the country as it continues to face Russian aggression. The innovative use of Russia’s frozen assets as collateral demonstrates a new approach to addressing the ongoing conflict in Ukraine while ensuring financial stability for all parties involved.
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