The EU plans to attract up to 40 billion euros in loans for Ukraine without the US.
Brussels is developing an alternative financing solution to circumvent Hungary’s veto on continuing the freeze on Russian assets, the Financial Times reported, citing three people involved in the talks.
The EU initiative comes amid concerns in Brussels that Hungary will prevent the bloc from providing guarantees the US needs to participate in the frozen assets scheme.
The government of Viktor Orban, the EU’s most pro-Russian leader, has tried to delay a decision on the asset freeze scheme until after the US presidential election on November 5.
The funds are intended to support the financial stability of Ukraine, which faces a financing gap of $38 billion in 2025, according to Kyiv and the IMF.
Ukraine relies on foreign aid to stay afloat as Russia steps up attacks on its infrastructure.
The EU plans to provide Ukraine with an unspecified number of billions in loans by the end of 2024, according to a draft legislative proposal seen by the FT.
Such a move, expanding the existing aid program, would require majority support rather than unanimity, stripping Budapest of its veto power.
The final amount could be between 20 billion and 40 billion euros and will be set by the European Commission after consultation with member states, officials said.
In June, G7 leaders agreed to provide Ukraine with a $50 billion loan to be repaid with future revenues from Russia’s frozen foreign exchange reserves, much of which are held at Euroclear, Belgium’s central securities depository.
Under the plan, the EU and the US would each provide 20 billion, with the remaining 10 billion to be shared between the UK, Japan and Canada.
But the US, to ensure a steady stream of revenue to service the loan, demanded guarantees that Russian assets, most of which are in Europe, would remain frozen.
The commission, in turn, proposed extending the bloc’s asset-freezing sanctions on Russian assets from the current six-month period to 36 months to provide greater legal certainty.
Other proposed options include extending sanctions for five years.
But Orban, who has vetoed EU support for Ukraine in the past, is blocking such a move.
A Hungarian government spokesman told EU ambassadors in Brussels on Monday that the issue would have to be resolved after the US elections.
As an alternative, the EU is now considering providing loans under the existing financial support package, which expires at the end of this year.
The scheme would involve increasing the bloc’s overall borrowing and would be supported by the EU’s overall budget.
The EU plan would provide some of the $20 billion that Washington would have to provide under the G7’s original proposal if the Biden administration fails to provide the loan before the election. Brussels officials hope Washington will provide the funds anyway, thereby reducing the risks for the EU.
Otherwise, Brussels must begin work in the next few weeks to clear all the necessary legislative hurdles in a timely manner, as the support package for Ukraine expires at the end of the year.
Source: Racurs
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