The European Parliament has approved the EU’s maximum €35 billion ($37.8 billion) loan to Kyiv. This will serve as the backbone of a giant G7 (plus EU) $50 billion (€46 billion) loan, announced a few months ago. The approval was the final procedural hurdle for Brussels to pass, although other allies are taking their time.
The plan is to use the windfall profits generated from $250 billion worth of frozen Russian assets held in European banks to pay off interest on the loan. Although the U.S. and Japan have not yet clarified how much they will each contribute, the Western powers expect the money to be transferred to Ukraine by the end of the year.
The parliament’s Strasbourg plenary voted to approve the package by a majority of 518 in favor and 56 against, with 61 abstentions. The German AfD-led Europe for Sovereign Nations (ESN) group was the only one where the majority voted against the loan, while the majority in the Patriots for Europe (PfE) group abstained.
However, €35 billion (76% of the total) is not the final figure, as Brussels hopes that the U.S. contribution will be big enough to offset some of it. So far, the UK and Canada have pledged to lend $3 billion and $3.6 billion, respectively.
This leaves a minimum of $5.6 billion to be covered by Japan and the U.S., the two remaining G7 members that have not yet revealed their intended share of the loan. However, depending on the outcome of the U.S. presidential election in early November, Washington’s contribution could be much higher, reducing the European proportion in the final pot.
The Biden/Harris administration has been putting that decision off not only so that it wouldn’t affect the Democrat’s election chances—one of the Republicans’ appeals is the promise to reduce aid to Ukraine—but also because Washington uses it as a bargaining chip to force Europe to impose more robust sanctions on Russia.
Previously, the Biden administration insisted that unless the EU extends the sanctions renewal timeframe to at least 36 months, its contribution will not be much more than the minimum needed to reach the $50 billion goal.
Under current rules, the EU’s sanctions against Russia come up for review and renewal every six months, which Washington believes creates the risk of any single country unfreezing the assets, forcing governments to use their resources to repay the interest on the loans.
While all EU leaders want to avoid that scenario at all costs, Hungary’s conservative government is still against extending the renewal period because of all the other sanctions imposed on Russia. It argues that many of those, especially the ones impacting the energy sector, have been counterproductive: they not only failed to make a dent in Russia’s economy but also made Europe significantly poorer and heavily reliant on expensive alternative fuel supplies from America. This could be the true motive behind Washington’s insistence on changing the rules and locking in Europe’s harmful sanctions for at least another three years.
Separately, the UK government announced plans to further fund Ukraine’s war effort with a £2 billion (€2.4 billion) loan, also paid for from frozen Russian assets.
