EU plots £17.4bn workaround funding for Ukraine in boost for Zelensky
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The European Union has drawn up a £17.4 billion workaround fund to overcome Hungary’s opposition to further support for Ukraine, it has emerged.
Officials were forced to prepare the “Plan B” after Viktor Orbán, the prime minister of Hungary, vetoed a £43.5 billion aid package for Kyiv at a EU leaders’ summit in Brussels earlier this month.
Under the new plan, participating member states would issue guarantees to the bloc’s shared budget to allow the European Commission to borrow money for Ukraine on international markets, the Financial Times reported.
Support from Brussels is seen as crucial for propping up Ukraine’s economy while US President Joe Biden’s own aid package remains blocked and a slowdown in Western support has forced Kyiv’s forces to downsize military operations.
The Kremlin said any fresh EU attempts to aid Kyiv would not change the course of the war and would only hurt the bloc’s economy.
Dmitry Peskov, the Kremlin spokesman, said it was up to the EU’s taxpayers to realise their money was being misspent.
While the latest scheme is expected to deliver less than the original £43.5 billion promised, it cannot be blocked by Hungary when EU leaders reconvene for emergency talks on Feb 1.
It only requires member states with top credit ratings to agree to lend a guarantee for the planned loans.
Some countries, including Germany and the Netherlands, would have to secure backing from their national parliaments for the plan.
The plan has a similar structure to a £86.9 billion arrangement used to provide cheap financing to EU countries for short-term work-support schemes during the coronavirus pandemic in 2020.
People briefed on the talks said if EU leaders agree on this plan on Feb 1, the reassurance would be enough to release a £782 million tranche of funding to Ukraine from the International Monetary Fund.
That will be enough to prevent Kyiv from resorting to printing money to sustain its deficit, which could risk inflation spiralling out of control.
The EU’s money is expected to arrive in March, a date for new financial aid promised to Kyiv during a meeting of G7 finance ministers last week.
One downside discussed by officials involved in the process is that the workaround would only provide low-cost loans to Ukraine, and not grants that need not be repaid.
The previous scheme had hoped to deliver £14.7 billion in grants and €28.7 billion in loans over the next four years.
Individual member states will be invited to offer their own bilateral grants in an effort to support Kyiv in the short term.
Hungary expects more funds before Ukraine aid restarts
A second back-up option being considered by EU capitals could use existing structures to offer Ukraine cheap loans for just a few months.
It would require a majority of member states to vote for its approval before being put into action.
Both packages are under discussion with the final amounts not yet agreed upon.
The £43.5 billion package, however, originally worked up in June, remains the priority and there is still hope in Brussels that Mr Orbán’s opposition can be overcome.
The Hungarian prime minister was offered £8.7 billion in funding withheld from Budapest over fears of an erosion of democratic standards before the summit earlier this month as part of an attempt to get him to approve the support.
Mr Orbán’s aides have made clear that they expect another £17.4 billion to be dispersed before talks over the aid for Ukraine can be restarted.
Hungary is seen as Russia’s closest ally in Europe. The Central European state has not sent weapons to Ukraine and has opposed the EU’s attempts to sanction Russian energy exports.
The report of the EU’s workaround came as it emerged that at least 33 Russian sailors were missing yesterday/on Wednesday following a Ukrainian missile strike on a warship in occupied Crimea.
About 20 others were wounded and a 64-year-old port worker was killed in the attack on the Novocherkassk, according to Astra, a Russian opposition news outlet.
Debris from a British-donated Storm Shadow cruise missile was found near the destroyed vessel at the port of Feodosia.
“The ship completely burned out and sank,” Astra reported on the Telegram messaging app.
Russia’s defence ministry confirmed the missile strike on the Novocherkassk, but said it had been only lightly damaged by the attack.
As many as 77 sailors were believed to have been onboard the vessel when it was hit at 3am local time on Tuesday morning.
The ship was also thought to have been carrying Iranian-made Shahed-type kamikaze drones, used by Russian forces to bombard Ukraine.
Satellite footage published by Planet Labs appeared to show the vessel partially submerged after it had been struck.
Video footage of the attack showed a fireball illuminating the skies above the Crimean peninsula.
Analysts suggested there had been secondary explosions from the munitions based on board cooking off.
