A €90 billion EU loan for Ukraine, blocked by Hungary under outgoing prime minister Viktor Orbán, is set to be revived following his defeat in an election this month and a resumption of Russian oil deliveries to Hungary over Ukraine.
European Union leaders had decided last December to jointly borrow the money to lend to Ukraine to fund its defence against Russia for this year and next, using frozen Russian funds as a potential backstop to ensure that Moscow ultimately pays.
How will Europe lend Ukraine the money?
The EU will provide interest-free loans for the years 2026-2027 based on EU borrowing on capital markets backed by the EU budget headroom, which is the difference between the maximum amount the EU can ask EU members to contribute and the amount it needs to cover foreseen expenses.
Hungary, Slovakia and the Czech Republic, with governments seen as closer to Moscow, secured exemptions that mean they will not participate in the joint borrowing.
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How will it be repaid?
Ukraine is not expected to pay the money back from its own funds, with the capital only due for repayment once Russia pays war reparations after the conflict is over.
Russia has central bank assets that are frozen in the EU which are worth about €210 billion and which could be used for the repayment.
The scheme was designed to effectively make use of the frozen Russian funds to help Ukraine without confiscating the money, a step that had been rejected as legally risky.
What will the loan cover?
The €90 billion will cover two-thirds of Ukraine’s needs for the next two years, estimated at €135 billion. Of the total, Ukraine will get €45 billion in 2026 and another €45 billion in 2027.
Each year, €28 billion will be used for spending on military needs and €17 billion on general budget needs.
Brussels expects other developed countries sympathetic to Ukraine to provide the rest of the funding, which has already been promised for 2026.
What were the hurdles to the loan?
The idea of joint EU borrowing against the EU budget seemed initially impossible as it required unanimity and faced opposition from Orbán.
Hungary, Slovakia and the Czech Republic agreed to let the scheme go ahead after EU leaders agreed it would not affect them financially.
Hungary later blocked the loans after it stopped receiving Russian oil via the Druzhba pipeline across Ukraine’s territory. Kyiv says the pipeline was shut as a result of damage from a Russian strike.
Prospects for unblocking the loan brightened when Orbán lost an election on April 12th and the incoming prime minister Peter Magyar said he would not oppose the disbursements. Also, the Druzhba pipeline has been repaired by the Ukrainians and oil is about to start flowing. – Reuters
[ EU gives provisional approval to €90bn Kyiv loanOpens in new window ]
