The European Union has pledged a €35 billion loan to Ukraine to help the country recover from the financial devastation caused by Russia’s invasion. The key to this loan is Russia’s frozen assets, which will act as collateral and be used to fulfill all repayments, exempting Ukraine’s budget from any burden. This groundbreaking initiative stems from the idea of making Russia pay for the war it has caused in Ukraine. The frozen assets, estimated at around €270 billion, will generate windfall profits that will be used to support Ukraine’s army and reconstruction efforts.
The EU’s share of the loan is much higher than initially planned, with Commission President Ursula von der Leyen proposing €35 billion to prompt swift action from other allies. The funds will be channeled through the Ukraine Loan Cooperation Mechanism, where allies can tap into the windfall profits to fulfill repayments. The loan is expected to be disbursed gradually throughout 2025, providing Ukraine with much-needed financial relief.
However, the issue of Hungary’s potential veto on the frozen assets remains a concern. The EU is exploring ways to extend the period for renewing restrictions on the assets to 36 months to ensure long-term predictability. Despite potential obstacles, the EU remains committed to supporting Ukraine and holding Russia accountable for its actions. The loan proposal is currently awaiting approval from the Council and the European Parliament, with hopes of a prompt agreement and disbursement by late 2024 or early 2025.
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