European Union leaders have brokered a significant agreement to provide Ukraine with a substantial new loan, following intense negotiations that saw Hungary drop its veto. The deal, finalised in the early hours of Friday, will see the EU back an interest-free loan to support Kyiv's military and economic needs for the next two years.
A Compromise Reached in Brussels
The breakthrough came after hours of discussions among leaders at the European Council meeting in Brussels. Hungarian Prime Minister Viktor Orbán agreed not to block the borrowing on the condition that his nation, along with Slovakia and the Czech Republic, would be excluded from providing financial guarantees for the debt. The official text confirms that the arrangement "will not affect the financial obligations" of these three member states, which had expressed opposition to funding Ukraine.
This compromise marks a shift from earlier plans to utilise profits from frozen Russian sovereign assets, a proposal deemed too complex and politically demanding to finalise at this stage. One EU diplomat remarked, "We have gone from saving Ukraine to saving face, at least that of those who have been pushing for the use of the frozen assets."
The Stumbling Block of Frozen Assets
The primary obstacle to using frozen Russian funds centred on providing Belgium with sufficient guarantees. Belgium holds approximately €185 billion of the total €210 billion in Russian assets immobilised within Europe. Authorities sought protection against potential financial and legal risks from Russian retaliation if the money were directed to Ukraine.
German Chancellor Friedrich Merz, a strong advocate for the frozen asset plan, clarified the loan's terms. He stated that Ukraine would only be required to repay the loan if Russia paid war reparations. Furthermore, the EU reserves the right to use the immobilised Russian assets for repayment should Moscow fail to provide compensation. Despite the change in mechanism, Merz asserted the final decision "sends a clear signal" to Russian President Vladimir Putin.
Wider Context: Cyber Attacks and Sanctions
The EU's financial manoeuvring occurs alongside other significant developments related to the conflict. The Danish government has accused Russia of orchestrating two "destructive and disruptive" cyber-attacks, describing them as "very clear evidence" of a hybrid war. The Danish Defence Intelligence Service linked Moscow to a 2024 attack on a water utility and denial-of-service attacks ahead of local elections, aiming "to create insecurity" and "punish" Ukraine's supporters.
On the sanctions front, Britain has imposed new measures targeting 24 individuals and entities. This includes sanctions on major Russian oil companies Tatneft, Russneft, NNK-Oil, and Rusneftegaz, described as the largest remaining unsanctioned firms in the sector. The EU also sanctioned 41 more ships in Russia's "shadow fleet" used to circumvent Western trading restrictions.
Meanwhile, on the ground in Ukraine, Russian strikes near the Black Sea port of Odesa killed a woman in her car and injured her three children, hitting critical infrastructure and causing prolonged power cuts.
