EU Seeks Alternative Path to Aid Ukraine Amid Hungarian Blockade
In a bold move to provide crucial financial support to Ukraine, the European Union is set to bypass Hungary's blockage of a jointly planned aid loan, enlisting the U.S. as a backup but proceeding without its assistance. During her recent visit to Kyiv, EU Commission President Ursula von der Leyen confirmed that Ukraine is to receive an additional loan of up to 35 billion euros aimed at alleviating the financial crisis threatening the besieged nation.
The backdrop of this urgent financial aid stems from an initial agreement involving the EU and G7 countries, including the United States, aimed at providing Ukraine with a substantial loan of 50 billion dollars. This funding was intended to be financed through returns on the frozen assets of the Russian central bank, which are primarily held in Belgium. However, complications arose when it came to extending the European sanctions resolution that freezes these assets, which must be done unanimously every six months.
Fears about the pro-Russian stance of Hungary significantly impeding this plan spurred Washington to act cautiously. The Biden administration sought to avoid putting the financing mechanism at risk by allowing any one country, specifically Hungary, to derail it. As negotiations aimed at extending sanction resolution deadlines to several years stalled due to Hungarian opposition, the EU Commission was left with no choice but to explore alternative routes that would enable the provision of aid without requiring unanimous approval—a strategy that could circumvent Budapest's influence.
The EU Commission is now poised to increase the ongoing aid package—previously approved by all EU governments until the end of this year—by adding a loan of 35 billion euros. This approach is facilitated by a so-called qualified majority of EU countries, a voting mechanism that prevents Hungary from exercising a veto. The funding will also come from the returns of the previously frozen Russian assets, which amount to nearly 200 billion euros, generating annual profits estimated between 25 to 35 billion euros.
Despite the changes in the funding strategy, a delicate political risk remains. The potential for Hungary to refuse to support extended sanctions on Russia puts the responsibility of managing these political tensions squarely on the Europeans. As a result, while Ukraine stands to gain a significant amount of financial aid—albeit 35 billion euros instead of the earlier proposed 50 billion dollars—the landscape of European funding and its dependence on unanimous sanction resolutions faces a critical test in the coming months.
With Ukraine's urgent needs pressing forward, this maneuver by the EU not only reflects the complexities of international finance amid geopolitical strife but also emphasizes the resolve of European nations to support Ukraine in its time of dire need, even in the face of contentious intra-European politics.
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