Putin will spin this €90bn Ukraine loan as a win – but we shouldn’t believe him ...Middle East

Ukraine has won a lifeline for the next two years that will save it from capitulating to Russia thanks to a €90bn (£79bn) loan from the European Union.

The loan will be backed by the bloc’s shared budget, after a plan to use some of Russia’s €210bn (£183bn) frozen assets collapsed.

Ukraine will only be required to repay the interest-free loan once Russia has paid reparations for its invasion.

“We committed, we delivered,” European Council President António Costa said after the loan was agreed during a summit of EU leaders.

He vowed that the bloc would continue working on a plan to use immobilised Russian cash – about 88 per cent of which is held by Belgium – to back a “reparations loan” for Kyiv. “The union reserves its right to make use of the immobilised assets to repay this loan,” he said.

The plan to use the frozen assets collapsed after Belgium demanded to have unlimited budget guarantees from other member states to protect it against legal retaliation from Moscow.

Euroclear, the Belgian central securities depository, is being sued by the Russian central bank for $230bn (£172bn).

Moscow is expected to spin the summit’s outcome as a win, experts told The i Paper, but added that the loan could open the door to other countries – including the UK, Australia, and Japan – offering Kyiv financial assistance, and “for the next two years at least, Ukraine’s financial survival has been secured”.

What does this mean for Ukraine?

Volodymyr Zelensky said he was grateful to European leaders for the loan, which he described as “significant support that truly strengthens our resilience”.

Ahead of the summit, he warned that Ukraine faced a €45-50bn deficit for next year. “The deficit could be even larger – we do not know exactly how events will unfold next year,” he told reporters on Thursday.

French President Emmanuel Macron also acknowledged after the summit that the “absence of a decision would have been a disaster”, particularly for European credibility at a time when it is coming under pressure from both Russia and the US.

The International Monetary Fund has estimated that Ukraine will need about €135bn ($158.57bn) for 2026 and 2027 – of which €90bn was covered by the EU’s loan.

“The problem for Ukraine is to generate enough funding to keep going,” Iain Begg, Professorial Research Fellow at the European Institute, told The i Paper.

The EU leaders’ new deal will provide “substantially more” than the “Ukraine Facility“, which offers Kyiv €50bn (£44bn) to support of its recovery and reconstruction efforts, Begg added.

He said the loan meant “Ukraine no longer faces a solvency problem in the short term, enabling it to keep up spending, although clearly it is becoming ever more indebted for the longer term. The loan being interest free is very helpful.”

The remarks were backed by Renaud Foucart, Senior Lecturer in Economics at Lancaster University, who told The i Paper: “The loan is a lifeline.

“Without it, Ukraine simply had no more money to function next year and would have had no other choice than capitulation. It will not give Ukraine enough to retake its territories, but it provides support to continue the current war of attrition until a ceasefire is signed.”

Divisions on Ukraine within Europe

Divisions within Europe were evident as EU leaders locked horns over Ukraine’s financial support plan.

Hungary appeared to be the biggest opponent of the plan and, ahead of the summit, its leader, Viktor Orbán, agreed not to block the loan as long as his country, Slovakia and the Czech Republic were excluded from the guarantees for the debt.

But Stefan Wolff, professor of international security at the University of Birmingham, told The i Paper: “There is still a clear majority inside the EU in favour of support for Ukraine.”

He explained that Article 20 of the Treaty on European Union, a procedure allowing at least nine member states to exclusively adopt measures on certain issues, has enabled the bloc to “preserve a united front on Ukraine”.

Wolff added: “It is not clear whether this is a sustainable strategy in the long term as the number of member states opting out or being relatively non-committal on Ukraine might increase if there are further electoral shifts toward the populist right or left.

“However, for the next two years at least, Ukraine’s financial survival has been secured.”

‘Putin will spin this as a win’

However, ultimately the EU walked back from using Russia’s frozen assets to aid Ukraine.

“[Vladimir] Putin is almost certainly going to chalk this up as a win and credit his pressure on Belgium, his good relations and ideological alignment with Orbán and [Slovakia’s Robert] Fico, and likely also [the Czech Republic’s] Andrej Babiš, for this,” said Wolff.

Putin addressed the move to use the assets during his end-of-year address today, comparing EU leaders to “burglars”.

“Theft is [in] secret… here it is done in the open,” he said. “It’s burglary… the consequences are very serious for the burglars.” He added that Russia would fight it in the courts.

Stephen Hall, Assistant Professor in Russian and Post-Soviet Politics at the University of Bath, said: “Moscow will spin it as a win because they stopped the so-called ‘piracy’ of the EU’.”

The Kremlin’s top economic negotiator, Kirill Dmitriev, welcomed the failure to “illegitimately use Russian assets to finance Ukraine” in a post on Telegram, saying that “for the time being, the law and common sense have won a victory”.

But Hall cast doubt on the degree to which the summit’s outcome marked a victory for Moscow.

“The assets are frozen,” he said. “The EU doesn’t require every member to approve those assets to be frozen, it requires a majority,” Hall added, pointing out that countries such as Hungary would not be able to obstruct plans to keep the assets immobilised.

Hall also said the US would now need the EU’s permission to use frozen assets for the benefit of American companies, including through joint projects with Moscow – a proposal Donald Trump has previously espoused during peace talks.

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“Trump should now be aware that the EU does have a right to sit at the table” in future negotiations about Ukraine’s future, Hall said.

He added that the loan would open the door for other countries – including the UK, and potentially Australia, Japan and Canada – to provide Kyiv with financial support.

Britain holds about £25bn of frozen Russian assets and is exploring how to use them to legally to help Ukraine.

“I can’t imagine that the EU would do something so brave without knowing that other countries were also prepared to provide support to Ukraine,” Hall added.

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