The European Union has committed to providing Ukraine with a €35 billion loan to help the country recover from the financial devastation caused by Russia’s invasion. The loan will be supported by profits generated from Russia’s frozen assets, which will act as collateral for the repayment. The idea to make Russia pay for the war-related expenses began in 2022, and allies agreed to use the windfall profits to support Ukraine’s reconstruction efforts.
The loan initiative is part of a larger plan involving the G7 countries to raise a total of $50 billion, with the EU contributing the majority share of €35 billion. Despite initial reservations from Washington regarding the renewal of sanctions, the Commission moved forward with the loan to prompt swifter action from other allies. The funds will be channeled through the Ukraine Loan Cooperation Mechanism, allowing allies to tap into the windfall profits for repayment.
The proposal will need to be approved by the Council and European Parliament before the end of the year, with hopes for a prompt agreement. Disbursement of the funds is expected to begin in late 2024 or early 2025, with the money being transferred to Ukraine’s bank accounts located in lender territories. The loan will be undesignated and untargeted, giving Ukraine autonomy in deciding how to use the assistance, including purchasing weapons and ammunition for its defense.
Despite the potential for a veto from Hungary on the frozen assets, Commission officials remain confident that the loan will proceed as long as restrictive measures against Russia remain in place. The US Congress will also play a role in approving funding to support the loan initiative.
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