The European Union has approved a €90bn (£78bn) loan for Ukraine, including a new clause that could allow the UK greater access to defence contracts if it contributes to the borrowing costs. Senior EU diplomats finalised the deal on Wednesday, marking a breakthrough after months of negotiations.
Under the plan, €60bn is earmarked for Ukraine's defence and €30bn for general budget support. The loan will be raised on capital markets, secured against unused EU budget spending. EU leaders chose this method after failing to agree on using Russia's frozen assets as collateral.
The UK clause requires a “fair and proportionate financial contribution” to the EU's borrowing costs, proportionate to the value of contracts won by British firms. The UK and EU signed a security and defence partnership in May 2024, fulfilling one condition. However, no specific contribution figure has been set, and further talks are needed to finalise product lists.
The loan is a critical lifeline for Ukraine, which faces a funding gap in 2026-2027 amid ongoing Russian attacks on its energy infrastructure. The EU expects the loan to cover two-thirds of Ukraine's needs, with other international partners filling the remainder. The first tranche could be released from April 2025, pending European Parliament approval.
UK Prime Minister Keir Starmer has signalled a desire to reopen defence talks with the EU, after earlier negotiations on the Security Action for Europe programme collapsed. The loan offers a more immediate avenue for rapprochement, potentially boosting British defence exports to Kyiv.
