EU Trade Committee Greenlights €35 Billion Loan to Ukraine, Funded by Seized Russian Assets

Ukraine: Trade Committee Approves Financial Aid Secured by Russian Assets

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On Monday, members of the European Parliament's Trade Committee approved a financial assistance package that could provide up to €35 billion in loans to Ukraine, aligning with the EU's role in the G7's support plan.

The Trade Committee approved the Commission's proposal to provide Ukraine with a special Macro-Financial Assistance (MFA) loan of up to €35 billion, with 31 votes in support, 4 votes against, and no abstentions. This loan represents the European Union's part in the G7's plan to assist Ukraine with up to $50 billion (around €45 billion) to help the country meet its immediate financial requirements amid Russia’s aggressive military actions.

The funds necessary for repaying this unique macro-financial assistance loan, as well as the loans from other G7 nations, will be sourced from the significant earnings generated by the frozen assets of the Russian Central Bank. This process is facilitated by the recently created Ukraine Loan Cooperation Mechanism, which was introduced following a proposal by the Commission.

Proceeds from frozen Russian assets, along with potential financial support from EU member nations and additional countries, will be allocated to Ukraine through a specific mechanism. This initiative aims to aid Ukraine in repaying the exceptional Macro-Financial Assistance (MFA) loan and other loans from G7 partners deemed eligible by the Commission. These resources will be exclusively utilized for the servicing and repayment of the qualified loans, including the MFA loan.

The recently announced MFA loan does not have specific allocations, giving Ukraine the flexibility to use the money as it sees fit. The governance and oversight frameworks detailed in the Ukraine Plan, including safeguards against fraud and irregularities, will be applicable to this loan as well. These new MFA funds are expected to be accessible by the end of 2024 and will be distributed through to the end of 2025. The loan is contingent on Ukraine's ongoing dedication to maintaining robust democratic practices, honoring human rights, and adhering to additional policy conditions that will be outlined in a forthcoming memorandum of understanding.

Statement

"Directing revenues from frozen Russian assets conveys a strong message that those accountable for Ukraine's devastation, primarily Russia, should bear the costs of its reconstruction. The newly established macro-financial aid and loan collaboration framework aids Ukraine in sustaining essential societal functions. Holding Russia financially accountable is a crucial measure. Ukraine is battling not only for its survival and liberty but also for ours. This initiative highlights the EU's steadfast dedication to upholding Ukraine's sovereignty and economic strength," stated Karin Karlsbro, the rapporteur from the Renew group in Sweden.

Upcoming Actions

The legislative body is anticipated to cast their votes on the proposal in the session scheduled from October 21 to 24. The proposal received approval from the Council last week, and they intend to finalize the regulation through a written procedure once Parliament has voted. It is anticipated that the regulation will become effective the day following its announcement in the EU's Official Journal.

Context

In September, the European Commission revealed a €35 billion loan package for Ukraine, which is part of a broader initiative by G7 countries aiming to provide up to $50 billion (€45 billion) in loans. The plan is to use future proceeds from Russian state assets that have been frozen to fund these loans. Currently, about €210 billion worth of assets from the Russian Central Bank are frozen within the EU due to sanctions imposed following Russia's invasion of Ukraine in February 2022. EU member states have agreed to allocate the significant revenues from these frozen assets to aid Ukraine's military efforts and reconstruction initiatives. The establishment of the Ukraine Loan Cooperation Mechanism highlights the EU’s ongoing commitment to supporting Ukraine.

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Eszter Zalan

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