Economy

EU announces €35 billion loan to Ukraine as part of G7 aid plan

European Commission President Ursula von der Leyen travelled to Kyiv on Friday to announce a €35 billion loan for Ukraine, marking a significant step in the G7’s broader $50 billion aid plan.

The loan, funded by future profits from frozen Russian state assets, is intended to help Ukraine rebuild and fortify its infrastructure amid ongoing conflict with Russia.

Von der Leyen’s visit, her eighth to the country since the war began, was aimed at discussing critical issues with Ukrainian leadership, including winter preparedness, defense strategy, and Ukraine’s progress toward European Union accession.

Upon arriving in Kyiv, von der Leyen posted on social media platform X, stating that her discussions would cover a wide range of topics including “defense, EU accession, and progress on the G7 loans.”

The announcement comes at a pivotal moment as Ukraine faces increased pressure due to repeated Russian attacks on its energy infrastructure.

Part of a larger G7 initiative

The €35 billion loan is part of the G7’s $50 billion support plan for Ukraine, which has been under negotiation for several months.

According to sources familiar with the discussions, G7 leaders initially agreed in June to provide the aid package and distribute the financial burden according to each nation’s economic standing.

The US and EU were set to contribute $20 billion each, while Japan, Canada, and the UK would make up the remainder.

However, legal and political obstacles, especially concerning the frozen Russian assets, delayed the US contribution.

The plan relies on future profits from frozen Russian state assets, of which nearly €200 billion are immobilized in EU jurisdictions alone.

However, Hungary’s opposition to extending the sanctions regime against Russia prevented the EU from guaranteeing that these assets would remain frozen long enough for the loan to be fully realized.

Addressing the urgent need for aid

In the wake of Russia’s relentless attacks on Ukraine’s energy infrastructure, the need for financial support has become increasingly urgent. Ukrainian President Volodymyr Zelenskyy underscored the importance of this aid in a speech on Thursday, stating,

These assets should be used to protect lives in Ukraine against Russian aggression.

He also expressed the necessity for a mechanism to ensure that the $50 billion loan materializes quickly to offer much-needed relief.

“There is a clear decision regarding $50bn for Ukraine from Russian assets, and a mechanism for its implementation is needed to ensure that this support for Ukraine is felt in the near future,” Zelenskyy said, stressing the immediate need for tangible assistance.

EU’s increased share and the compromise reached

While the US remained hesitant to finalize its share of the loan, citing concerns over the duration of asset freezes, the European Commission sought to increase its contribution to €40 billion to compensate for the delay.

However, this figure met resistance from EU member states, who were reluctant to shoulder such a high proportion of the loan.

As a result, the final compromise of €35 billion was reached, allowing the US to join the program at a later stage and reducing the EU’s overall exposure.

Von der Leyen’s announcement of the loan is seen as a diplomatic victory for the EU, which has been striving to maintain unity and show unwavering support for Ukraine despite internal divisions.

The loan still requires approval from the majority of EU countries and the European Parliament before the end of the year.

If approved, it will represent a significant contribution to Ukraine’s efforts to stabilize its economy, rebuild critical infrastructure, and fortify its defenses against continued Russian aggression.

The €35 billion loan is a vital step in securing Ukraine’s future and forms part of the larger $50 billion G7 plan to aid the country during its ongoing conflict with Russia.

While challenges remain in securing legal guarantees and overcoming political resistance, the European Union’s commitment signals robust support for Ukraine as it continues its fight for sovereignty and stability.

The post EU announces €35 billion loan to Ukraine as part of G7 aid plan appeared first on Invezz

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