Von der Leyen announces €35B EU loan for Ukraine

European Commission President Ursula von der Leyen on Friday announced a plan in Kyiv to provide up to €35 billion as an EU loan to Ukraine.

“Relentless Russian attacks means Ukraine needs continued EU support,” she said. “This is another major EU contribution to […] Ukraine’s recovery.”

The loan is part of the G7 countries’ pledge this July to support Kyiv for the long term with arms deliveries and recovery aid, and will be financed from future profits on frozen Russian state assets that are mainly held in Europe.

“We are now confident that we can provide this loan to Ukraine very quickly,” von der Leyen said at her joint press conference with Ukraine’s President Volodymyr Zelenskyy.

The loan must be approved by a majority of EU countries and the European Parliament before the end of the year. The specific amount of the EU loan that will actually be funneled to Ukraine depends on how much other G7 countries are willing to contribute.

The G7 loan will be up to €45 billion, according to the Commission, as Canada, Japan and the U.K. are expected to contribute. There are questions as to whether the U.S. will play a role in the loan due to long-standing concerns that, as a result of the bloc’s sanctions rules, a single EU country can unfreeze the assets every six months therefore putting the loan at risk.

In an attempt to convince the U.S. to take part in the G7 loan, the EU will propose extending the renewal period for the assets from the current six months to 36 months, according to a senior Commission official, who spoke on condition of anonymity because they were not authorized to talk publicly.

But this might prove tricky as Hungary signaled earlier this week that it won’t allow the sanctions overhaul, which requires unanimity, before the U.S. elections in November.

Friday’s announcement indicates that Brussels will funnel the loan with or without the U.S. – although EU officials insist that they’d like to have Washington on board.

A senior Commission official said that they hope to receive a signal from the U.S. on whether they’ll contribute by the time of the IMF and World Bank meetings at the end of October.

“Around the time of the end of October, I would expect us to confirm or adapt the ‘up to 35 billion euros’ in view of … the total commitment by G7 partners,” the official said.

The EU’s pledge to offer long-term support to Ukraine was also seen as a condition for the IMF to approve its latest support package to the war-torn country.

‘Blatant and vicious’

Von der Leyen also addressed Russia’s recent attacks on Ukraine’s civilian energy infrastructure, calling the incidents “blatant and vicious” attempts to “plunge [Ukraine] into the dark.”

“The European Union is here to help you in this challenge: to keep the lights on, to keep your people warm as winter is just around the corner, and to keep your economy going as you fight for your survival,” von der Leyen said.

On Thursday, the European Commission president unveiled Brussels’ winter energy supply plan for Ukraine, which will help repair the damage to energy infrastructure caused by Russian attacks and restore 2.5 gigawatts of capacity this winter, which the EU estimates to be 15 percent of Ukraine’s needs for the season.

The Commission also plans to connect Ukraine to the EU’s electricity grid, so that member countries could export another 2 gigawatts to Kyiv during the winter.