EU Council agrees on €35bn for Ukraine as part of G7 loan involving proceeds from frozen Russian assets

The Council of the European Union has reached an agreement regarding a macro-financial assistance (MFA) package of up to €35bn for Ukraine, which will be part of a loan from the Group of Seven, using the proceeds from frozen Russian assets.

Source: European Pravda, citing the press service for the EU Council

Details: The EU Council has agreed to provide Ukraine with an exceptional loan of up to €35 billion and a credit cooperation mechanism that will help Ukraine repay loans of up to €45 billion from the European Union and G7 partners.

This refers to the European portion of a US$50 billion (€45 billion) loan from the G7, which is set to be repaid from future proceeds generated by the investment of frozen Russian sovereign assets, a concept agreed upon by leaders in June.

The EU plans to make the funds available to Ukraine from 2024, with the loan repaid over a maximum of 45 years.

The new macro-financial assistance will be tied to the same political conditions as the EU's existing financial assistance mechanism, the Ukraine Facility, which are set out in a special reform plan (Ukraine Plan).

"The management and control systems proposed under the Ukraine Plan and specific provisions on the prevention of fraud and other irregularities will also apply to the MFA loan," the press service noted.

"In view of a speedy adoption and ensuring that the macro-financial assistance reaches Ukraine as soon as possible, member states agreed today that if the European Parliament adopts the Commission’s proposal without changes, the Council will also proceed to adopt the text without modifications," it added.

The EU Council will need to approve the decision in writing following the European Parliament's adoption of the text in its first reading. The decision will take effect the day after its publication in the Official Journal of the EU.

Background: 

• The US's participation in the loan was contingent on the EU extending the timelines for reviewing and renewing the sanctions imposed on Russia, providing greater assurance that these sanctions would be upheld and that the proceeds from frozen assets would continue to be available for repaying the loan.
• Hungary has consistently threatened to obstruct this decision within the EU until after the US presidential election, potentially derailing the entire initiative.
• Reuters, citing unnamed diplomats, reported that the European Commission had proposed extending the review period for sanctions from 6 to 36 months. However, Hungary resisted bringing this proposal to the EU ambassadors for discussion. Therefore, the decision does not contain a safeguard against unexpected lifting of sanctions, as the United States wanted.
• The source noted that a vote in the European Parliament is expected on 22 October.

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