Brussels: European Union member states have reached an agreement to establish a new £90 billion financial support instrument for Ukraine for the period 2026-2027, aimed at covering both the country's immediate budgetary needs and strengthening its defence capabilities. The agreement was reached under the Cyprus Presidency of the Council of the EU, approving at the level of Permanent Representatives an EU position on the legal framework that will implement the political agreement of the 24 participating member states, paving the way for the swift conclusion of negotiations with the European Parliament.
According to Cyprus News Agency, the first disbursement is expected to take place at the beginning of the second quarter of the year, with a target of as early as the beginning of April. The support package will take the form of joint EU borrowing on the capital markets, backed by the EU budget. The funds will be disbursed gradually, in tranches, in line with Ukraine's financing needs.
Of the total amount, £30 billion will be allocated to support Ukraine's state budget through macro-financial assistance or via the dedicated 'Ukraine Facility', while £60 billion will be directed towards strengthening Ukraine's defence industry and the procurement of military equipment and ammunition. This allocation may be adjusted if the circumstances of the war change.
'Today's agreement shows that the EU continues to act decisively in support of Ukraine and its people. The new financing will help ensure the country's fierce resilience in the face of Russian aggression. At the same time, we are sending a strong signal that the sovereignty and territorial integrity of states must be fully respected, in accordance with international law,' said Makis Keravnos, Minister of Finance of the Republic of Cyprus and President of the Council of Ministers.
The decision was taken under the enhanced cooperation procedure, with the participation of 24 member states. Hungary, Slovakia, and the Czech Republic are fully exempted from the financial obligations of the scheme, including annual interest payments, as they had opposed further assistance to Kyiv.
The European Commission estimates that the remaining 24 member states will be required to cover between £2 billion and £3 billion per year to service the borrowing, while the interest costs are planned to be covered by the EU budget in order to secure more favourable lending terms and safeguard Ukraine's debt sustainability.
Particular emphasis was placed on the rules governing military procurement. The agreement introduces a so-called 'cascading principle', under which procurement should, as a priority, be carried out from companies based in Ukraine, the European Union, and countries of the European Economic Area and EFTA, such as Iceland, Liechtenstein, Norway, and Switzerland.
Where the required equipment is not available in those markets, targeted derogations will apply, allowing Ukraine to procure defence products from third countries, such as the United States, where this is deemed necessary to meet urgent military needs.
At the same time, the framework provides for the participation of other third countries that have concluded security and defence partnerships with the EU - including, for example, those taking part in SAFE - and that provide substantial financial and military support to Ukraine, on the condition that they make a 'fair and proportionate' contribution to the costs of the joint borrowing. This category of third countries includes the United Kingdom and Canada, as well as Japan and South Korea.
It is noted that the loans to Ukraine will become repayable only once Russia has paid war reparations, in line with the framework approved at EU level.
The next step will be the rapid finalisation of negotiations with the European Parliament on the final legal texts, as well as the approval of the necessary amendments to the Multiannual Financial Framework, enabling the European Commission to proceed with the first disbursement in the coming months.