On Wednesday 4 February, Member States’ ambassadors to the European Union (Coreper) reached a political agreement in principle on the €90 billion loan to Ukraine for 2026 and 2027 (see EUROPE 13786/4).
“Today’s agreement shows that the EU continues to act decisively in support of Ukraine and its people”, Cypriot Finance Minister, Mákis Keravnós, said in a statement.
In accordance with the decision of the European Council in December, the agreement of the EU Council, which was approved by the 24 Member States (all except Hungary, Slovakia and the Czech Republic) that initiated enhanced cooperation, provides that the future loan will be financed by the EU budget.
Of the €90 billion package, two-thirds will help Ukraine continue the war effort against the Russian military invasion, and one-third will be used to finance Ukraine’s budgetary needs, notably through the ‘Ukraine Facility’, a financial instrument already used to manage the EU’s macrofinancial assistance for the 2024-2027 period.
The military equipment concerned falls into the two categories already identified during the negotiations on the ‘SAFE’ instrument (see EUROPE 13642/3).
During negotiations between Member States on the ‘Ukraine Support Loan’, the most discussed issue was the participation of the military industry of third countries in equipment purchases by Ukraine to be financed through the future EU loan.
As with the ‘SAFE’ instrument (see EUROPE 13645/28) and the ‘EDIP’ programme, the Council is introducing cascading European preference whereby Ukraine will first obtain supplies from its own military industry, then from EU and EEA/EFTA countries, and finally from other third countries.
As a general rule, the value of components purchased from third countries may not exceed 35% of the total value of the equipment purchased.
However, the legislative text provides for a derogation for military equipment that is not manufactured in Ukraine, the EU or the EEA/EFTA countries, or that is not available on the scale required or within a timeframe commensurate with the urgency of the war in Ukraine.
For third countries that could benefit from this derogation, two scenarios are envisaged. Countries that have concluded an agreement with the EU on their participation in the ‘SAFE’ instrument - to date only Canada (see EUROPE 13764/25) - will have to formalise their association with the future loan by detailing the specific equipment that could be purchased from their national industry.
Third countries which have entered into a security and defence partnership with the EU - such as the United Kingdom or Japan - and which already provide substantial military aid to Ukraine, will have to commit to contribute financially in order to offset the interest (approximately €3 billion per year) on the EU loan which the 24 EU countries will have to bear, and also detail the type of products which Ukraine will be able to acquire.
Ukraine will have to demonstrate the need to use the derogation to purchase equipment from third countries. And the Commission, after consulting national experts, will check that the applicable criteria have been met.
On the basis of this mandate, the Cyprus Presidency will begin discussions with the European Parliament as soon as it is in a position to negotiate with the Council. The aim is to reach an interinstitutional agreement enabling the first payments to Ukraine to be made at the beginning of the second quarter of 2026.
See the Council’s agreement on the terms and conditions of the ‘Ukraine Support Loan’: https://aeur.eu/f/kkw ; and the amendment of the Ukraine Facility: https://aeur.eu/f/kkx (Original version in French by Mathieu Bion)