Europe salvages credibility with last-minute $105 billion funding deal on Ukraine

Europe’s 90 billion euro ($105 billion) interest-free loan to protect Ukraine’s economy and military from a budget black hole by 2027 did not materialize as some leaders wanted, but its realization was a win for the bloc.

“If we had left Brussels divided today, Europe would be out of geopolitical interest,” Belgian Prime Minister Bart De Wever told reporters just before 4 a.m.

“It would be a complete disaster.”

Leaders of the 27 member states of the European Union Failed to agree to a historic loan using frozen Russian state fundsbut the compromise was clear. Ukraine will not repay a penny until the war is over, and Europe has reserved the right to use Russian assets to finance the loan.

The bloc’s executive branch now has the authority to investigate how to do this.

And for now, the loan funds will be welcome in Kiev, which is trying to halt Russian battlefield gains while negotiating a peace plan with Washington to end the war.

Ukrainian President Volodymyr Zelensky had warned that failure to provide findings for Ukraine would leave Kiev in a position where the country would not have enough money “for life and weapons”.

He hailed the 11th-hour breakthrough on Friday.

Zelensky wrote to

European leaders also targeted Moscow.

European Council President Antonio Costa said, “The message we sent to Russia today is very clear. First, you failed to achieve your goals in Ukraine. Second, Europe stands by Ukraine today, tomorrow and as long as necessary.”

According to International Monetary Fund estimates, Ukraine is expected to have a funding gap of $160 billion (€137 billion) over the next two years, partly due to the United States cutting funding. The EU was considering covering two-thirds of this, that is, approximately 105 billion dollars (90 billion euros).

The idea of ​​using frozen assets is not new. It had been airing since the early days of Russia’s 2022 invasion of Ukraine.

And it has long faced fierce opposition from some European powers. French President Macron declared in the Oval Office in February that the idea of ​​tapping Russia’s state funds was a violation of international law.

This week, he applauded Europe’s move as a crucial “visibility” in Ukraine’s budget.

Another red line has fallen, as has Western support for Ukraine.

Philippic

But it wasn’t all plain sailing. Hungary, Slovakia and the Czech Republic voted for the loan on the condition that it would not affect them financially.

Belgium, which holds the vast majority of dormant funds, fears future retaliation by Russia or liability if a peace agreement leads Moscow to demand the return of the funds.

Before the vote, Belgian De Wever demanded “binding guarantees” from all EU member states in exchange for his country’s approval of the compensation loan.

“Mere verbal promises are not enough,” he told the Belgian parliament on Thursday.

The EU has so far been using interest on assets, mostly bonds, to finance some of its support to Kiev. But as the bonds mature, they turn into cash, and this is the cash that the EU administration wants to borrow and lend to Ukraine until Russia pays compensation.

On Monday, the Russian central bank filed a lawsuit seeking billions of dollars in damages from Belgium’s Euroclear warehouse. The bank described the move as a preventive measure against the EU’s plan to transfer frozen assets held by Euroclear to “third parties”, according to Russian state news agency TASS.

Russia’s central bank said in a press release on Friday that it will claim damages from European banks in the amount of frozen assets and lost profits.

Side effects

As the longest night of the year unfolded in Brussels, the situation in Europe looked bleak.

US President Donald Trump called European leaders “weak” in a recent interview, just days after his administration’s new National Security Strategy accused Europe of being “trapped in political crisis” and suffering from a “lack of self-confidence”.

The US-backed 28-point peace plan, leaked last month, called for $100 billion of Russian central bank assets frozen around the world to be invested in “US-led reconstruction and investment efforts in Ukraine” and for the US to profit from these investments. Assets frozen in Europe make up the bulk of Moscow’s assets immobilized globally.

This led to increased diplomatic efforts among European leaders who were outraged at the thought of the White House seizing their assets.

Ursula von der Leyen, the head of the European executive, called this “Europe’s moment of independence” in a veiled swipe at the United States and expressed the idea 10 times in a brief speech before the European Parliament on Wednesday.

He said this week’s summit was about confronting “the reality of a world that has become dangerous and commercial, a world full of wars, a world full of predators.”

“Europe must be responsible for its own security. This is no longer an option, it is an obligation,” he said.

The transatlantic confidence long taken for granted has evaporated this year.

Europe is now wary of the forces fueling division on two fronts: the cultural attacks of the White House and, above all, the destructiveness and hostility of Moscow. President Putin’s near-constant efforts to undermine Europe before the start of the EU summit reached new heights on Thursday when he referred to the continent’s leaders as “piglets” in a speech to Russia’s military brass.

“The Russians are working day and night to tear Europe apart, and they’re doing it better than Europe is at staying together,” Tom Keatinge, director of the Center for Finance and Security at the Royal United Services Institute think tank, told CNN.

lifeboat

The White House has openly used Ukraine’s past battlefield difficulties or structural weaknesses as leverage for a hasty peace deal.

Speaking before the European negotiations concluded, Zelensky said that the financing agreement would eliminate this threat.

“If we have these assets, we will be more confident at the negotiating table,” he said, ensuring Kiev’s ability to publicly resist for at least a few more years.

He acknowledged that no deal would seriously hurt Kiev’s crucial drone industry, which is a lifeline for front-line troops.

Similarly, the country’s vaunted long-term attacks on Russia, including Moscow’s oil and gas infrastructure, would also be affected, he said.

“All this will go away,” he told reporters.

The early hours of Friday morning brought some relief for both Kiev and Brussels.

Faced with Russia’s brutal attacks on Ukraine and a White House that seems hungry for a quick peace rather than a just peace, Europe’s lifeboat for Ukraine, retreating from the clutches of division and delay, promises Kiev a brave friend in the uncertain months ahead.

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