European Union leaders on Friday reached a deal to provide Ukraine with a 90 billion euro, or approximately $105 billion, interest-free loan for 2026-2027. The agreement came after lengthy discussions in Brussels and offers Kyiv a vital financial lifeline as the country continues to defend itself against Russia's full-scale invasion. The decision sidesteps an earlier proposal to use frozen Russian assets to back the loan, a plan that faced significant legal and financial objections from several member states.^{[1][2][3][4][5][6]} ### New Financial Lifeline for Kyiv The newly approved loan will provide crucial funds for Ukraine's economy and military over the next two years. European Council President Antonio Costa confirmed the agreement, stating that the EU "committed, we delivered." This support aims to cover a significant portion of Ukraine's anticipated financial needs. Ukraine is projected to face a funding gap of about $160 billion (€137 billion) over the next two years, according to forecasts from the International Monetary Fund. The EU's €90 billion loan is expected to meet roughly two-thirds of this critical shortfall. Th^[3][4][7]is substantial aid package will be financed through joint borrowing on capital markets, backed by the EU's common budget. This approach replaced the initially preferred option of using immobilized Russian central bank reserves. The loan will only require repayment from Ukraine once Russia provides reparations for the damage caused by the war. Until then, the EU stated that the frozen Russian assets will remain immobilized. ## Frozen Asset Plan Stalls Amid Legal Concerns The decision to fund Ukraine through direct borrowing marks a shift from the initial proposal to directly use some of the estimated €210 billion ($246 billion) in frozen Russian state assets held within the bloc. This plan encountered strong resistance, primarily due to legal and financial concerns raised by several EU member states. Belgium, where a large portion of these Russian assets are held by the financial markets company Euroclear, was a key voice of opposition. Belg^{[1][3][11][6][8][12]}ian officials expressed fears that directly repurposing these assets could expose the country to substantial legal liabilities and financial instability. They sought "ironclad guarantees" from other EU member states to share any potential risks from Russian legal challenges. Other countries, including Italy, also voiced doubts about the legal robustness of using the frozen assets at this stage. Russian President Vladimir Putin had previously warned that any such move would be considered theft and threatened massive legal action. Desp^{[1][2][3][11][6][13][12][14]}ite the failure to reach a consensus on using the frozen assets immediately, the EU leaders affirmed that Russia's assets will remain frozen. The European Council conclusions stated that these assets should stay immobilized until Russia ceases its aggression against Ukraine and compensates the country for war damages. The bloc also reserves the right to eventually use these frozen funds to repay the loan to Ukraine. ### ^{[1][2][3][11][6][8][9][10]}Ukraine Welcomes Aid, Eyes Further Support Ukrainian President Volodymyr Zelenskyy promptly thanked EU leaders for approving the loan. He called the decision "significant support" that truly strengthens Ukraine's resilience. President Zelenskyy emphasized the importance of Russian assets remaining immobilized and the financial security guarantee the agreement provides for the coming years. Ukrainian Prime Minister Yulia Svyrydenko echoed these sentiments, calling the decision a "decisive step for economic resilience and fiscal stability under wartime conditions." The ^{[1][2][4][5][8][14]}Ukrainian government estimates its unfunded military and budgetary needs at around €135 billion ($160 billion). While the EU's €90 billion loan covers a substantial part, Ukraine still needs to secure additional funding from its international allies. Ukrainian officials have stressed that predictable financial support is vital, especially as U.S. funding faces uncertainties. The European Commission estimates Ukraine will need an additional €135 billion to remain solvent over the next two years. President ^{[4][5][12][14]}Zelenskyy has warned that without consistent fresh funding, Ukraine might need to scale back its military capabilities, including drone production, by spring. The EU's commitment provides a critical financial buffer, boosting confidence among Ukraine's international partners. ### Europe^[5]an Unity Despite Internal Divides The agreement followed more than 16 hours of intense negotiations at the EU summit in Brussels. The talks highlighted both the bloc's commitment to Ukraine and the internal divisions regarding the financing mechanisms. Danish Prime Minister Mette Frederiksen stated, "The bottom line, after today, is that our support for Ukraine is guaranteed." German Chancellor Friedrich Merz called the agreement a "clear signal" to Russian President Vladimir Putin that the war would not be worth it. Hungary's ^{[2][4][11][15][5][6][16][14]}Russia-friendly Prime Minister Viktor Orbán had initially opposed using EU money to back Ukraine. However, Hungary, along with Slovakia and the Czech Republic, ultimately agreed to the loan scheme after receiving assurances that it would not financially impact their countries. Prime Minister Orbán stated that his country did not let Europe "declare war on Russia by using Russian assets." Belgian Prime Minister Bart De Wever described the eventual agreement as a triumph of "rationality," preventing "chaos and division" that could have arisen from using frozen assets. European Com^{[11][5][6][12][14]}mission President Ursula von der Leyen noted that the deal was reached after member states failed to agree on directly using frozen Russian assets. She emphasized that the EU remains united in its unwavering support for Ukraine for as long as needed. ### Looking ^[15][9]Ahead: Continued Support and Reparations Work The EU's decision provides Ukraine with critical financial predictability for the coming years. While the direct use of frozen Russian assets remains on hold, the European Commission received a mandate to continue exploring how to utilize these assets in the future. The EU leaders reiterated that the bloc reserves the right to use the immobilized assets to repay the loan if Russia fails to pay reparations. This agreeme^{[3][4][11][6][7][8][9][10]}nt underscores the EU's long-term commitment to Ukraine's recovery, reconstruction, and modernization efforts, as well as its path toward EU membership. The political and financial support from the EU is seen as crucial for Ukraine's ability to defend itself and for its eventual post-war rebuilding. The bloc will continue to work with international partners to ensure a just and lasting peace for Ukraine.

AI Insights Hub