The European Union plans to provide Ukraine with up to 40 billion euros in new loans by the end of the year, as reported by the British financial magazine Financial Times . This step is carried out without the participation of the US and is the result of the decision of the EU after the failure of the plan of the Big Seven (G7), which involved the use of frozen Russian assets for financial support of Ukraine.
The unilateral push comes amid concerns from Brussels that Hungary will prevent the bloc from providing the guarantees the US needs to participate in the asset freeze plan, according to three people involved in the talks.
The government of Hungarian Prime Minister Viktor Orbán, the EU's most pro-Russian leader, tried to delay a decision on the asset freeze plan until after the November 5 US presidential election, the paper said.
"But Brussels must begin work on any alternative within the next few weeks, as such a move would depend on the mandate, which expires at the end of the year," the paper writes.
The funds are reportedly intended to support the financial stability of Ukraine, which, according to Kyiv and the IMF, will face a financing deficit of $38 billion in 2025.
According to a draft legal proposal seen by the FT, the EU will provide an unspecified number of billions in loans to Ukraine by the end of 2024.
Such a move, an expansion of an existing aid program, would require only majority support, not unanimity, which would strip Budapest of its veto power.
The final amount could vary between 20 and 40 billion euros and will be set by the European Commission after consultations with member states, officials said.
"We can always act independently," said the EU official.
While the original plan - involving the US - remains the European Commission's plan, officials say they need an alternative if Budapest maintains its veto until the US election, the paper said.
G7 leaders agreed in June to provide Ukraine with a $50 billion loan, which will be repaid with future earnings from approximately 260 billion euros of frozen Russian foreign exchange reserves, most of which are held at Euroclear, Belgium's central securities depository.
According to this plan, the EU and the US will take on about 20 billion US dollars each, and the remaining 10 billion US dollars will be shared by Great Britain, Japan and Canada.
But the U.S., in order to ensure a steady flow of income servicing the loan, has demanded guarantees to ensure that Russian assets, most of which are located in Europe, remain frozen.
The European Commission, in turn, has proposed extending the bloc's sanctions, which block Russian assets, from the current six-month period to 36 months to provide greater legal certainty. Other proposed options include extending the sanctions for five years.
But Orbán, who has vetoed EU support for Ukraine in the past, is currently blocking such an extension, according to people familiar with his views.
A Hungarian government official told EU ambassadors in Brussels on Monday that the issue would have to be decided after the US election, according to two sources familiar with the discussions.
As an alternative, according to the publication, the EU is now considering the possibility of issuing loans within the existing package of financial support, which expires at the end of the year. The plan will include an increase in the bloc's total borrowing and will be supported by the EU's general budget.
The EU plan, according to the newspaper, includes part of the $20 billion that was planned to be received from Washington under the original G7 proposal, if the Biden administration is unable to provide a loan so close to the election. Brussels officials hope that Washington will eventually provide the funds.
Brussels, if it decides to issue the loans unilaterally, is said to have to start work in the next few weeks to clear any necessary legislative hurdles in time, as the support package for Ukraine expires at the end of the year.
"It is necessary to urgently adopt proposals by the end of October, so that the credit of the Union can be unblocked by the end of 2024 for future payments in tranches," the proposal reads.
The proposal, it said, would eventually still use proceeds from the frozen assets, estimated at €2.5 billion to €3 billion a year, to repay the loan. Currently, this profit is directed to Ukraine through the EU budget.
