What is the EU’s financial support to Ukraine?

Politics - February 3, 2023

Support to Ukraine from the European Union states, from the beginning of the Russian invasion until January 2023, on the basis of legislative packages adopted by EU bodies, has focused mainly on three areas – support to the Ukrainian army and economy and, last but not least, to refugees from the war.

In figures, the EU has put €3.1bn into helping the Ukrainian army win the war. To help Kiev keep the country’s economy afloat, the EU is providing €18bn in macro-financial assistance to Ukraine this year, on top of €7bn in funding allocated to the country from 2014 to 2022. Last but not least, immediately after the outbreak of the war, the EU released almost €500 million for Ukraine and another €40 million for the Republic of Moldova to provide humanitarian support to refugees, in addition to another €1.7 billion mobilised by member states. 

EU military support worth €3.1 billion for Ukraine

Brussels’ security support to Kiev in almost a year of war totals €3.1 billion. The amount has been granted in tranches, set by measures, adopted by the EU Council during 2022 under the European Peace Facility (EPF), “to further support the capabilities and resilience of the Ukrainian armed forces”. 

“With this action, the European Union is stepping up its support to help Ukraine defend its sovereignty and territorial integrity within its internationally recognised borders and to protect its civilian population from ongoing Russian aggression,” the EU Council announced in a statement posted on its official website in October, when the last €500 million tranche of this amount was allocated.

“The mobilisation of a further €500 million by EU Member States is further proof that we remain steadfast in supporting the Ukrainian armed forces in the defence of the country against the escalating illegal aggression. The new widespread attacks on Ukrainian civilians and civilian infrastructure are further proof of Russia’s total defiance of human rights and international law. The European Union will continue to support Ukraine as long as necessary”, said Josep Borrell Fontelles, EU High Representative for Foreign Affairs and Security Policy.

The money would help strengthen the capabilities and resilience of the Ukrainian armed forces and protect the civilian population from ongoing military aggression, officials in Brussels said. The agreed assistance measures will finance the provision of equipment and materials, such as personal protective equipment, first-aid kits and fuel, as well as military equipment and platforms designed to apply lethal force for defensive purposes, the source added.

In addition, a new EU military assistance mission (EUMAM) in support of Ukraine was established in October 2022 and launched in November 2022. The aim of this mission is to contribute to strengthening the military capability of the Armed Forces of Ukraine to conduct military operations effectively as well as to enable Ukraine to defend its territorial integrity within its internationally recognised borders, effectively exercise its sovereignty and protect civilians. The mission will initially last two years and the financial reference amount for common costs for this period will be EUR 106 700 000.

Between 2014 and 2022, the EU has supported Ukraine through several consecutive macro-financial assistance (MFA) operations, which exceeded €7 billion in the form of loans and grants.  In December 2022, the Council adopted a legislative package that will allow the EU to financially support Ukraine during 2023 with EUR 18 billion. 

The first tranche of this money has already been received, as confirmed by Ukrainian President Volodimir Zelenski on the 17th of January, while thanking European Commission President Ursula von der Leyen and the 27 member states for their ‘strong support’ for Kiev almost 11 months after the start of the Russian invasion. 

Macro-financial assistance is aid that the EU provides to neighbouring countries facing serious balance of payments problems, in addition to financial aid from the International Monetary Fund (IMF). It can take the form of medium- or long-term loans, grants or a combination of the two. The stated objectives of macro-financial assistance, as set out in the official Brussels communication on its website, are to provide short-term financial assistance, to finance Ukraine’s immediate needs, to support the rehabilitation of critical infrastructure, to provide initial support for sustainable post-conflict reconstruction and, ultimately, to help Ukraine on the path to European integration.

In 2022, the EU made available €620 million in budget support and adopted an emergency package worth €330 million focusing on the immediate needs of internally displaced persons. The EU is also providing support through the European Investment Bank and the European Bank for Reconstruction and Development, offering EU guarantees that allow these banks to lend to the Ukrainian government and businesses providing vital services.

Together with Ukraine and the Republic of Moldova, the EU has established EU-Ukraine solidarity corridors in May 2022. The aim of these key corridors is to ensure that Ukraine can export grain and other agricultural products, as well as import the goods it needs, from humanitarian aid to feed and fertiliser.

The electricity grids of Ukraine and the Republic of Moldova have been successfully synchronised with the European continental grid in March 2022. Thus, in June, Ukraine and the EU started trading electricity. The aid was granted after heated discussions between member states last year, and is expected to help the embattled country keep its budget and economy afloat as Kiev’s estimated monthly budget needs in 2023 will be around €4bn a month. Specifically, the support is in the form of 35-year loans with zero interest and the possibility of debt cancellation.

The EU’s reception of Ukrainian refugees fleeing their homes has been at the heart of member states’ joint response to the Russian-Ukrainian war. 

“The EU-wide action reflects the solidarity shown by citizens across the EU, as well as the huge efforts made by national and local authorities, NGOs, community associations and businesses,” the official communication from Brussels said.

 523 million EU humanitarian assistance to Ukraine

In figures, the EU’s humanitarian assistance to Ukraine amounts to €523 million, money given to help civilians affected by the war in Ukraine. This amount includes €485 million for Ukraine and €38 million for the Republic of Moldova. EU Member States alone have mobilised almost €1.07 billion.

To help people fleeing the war in Ukraine, the EU has approved regulations to make certain funds available. These funds are intended to ensure that member states hosting refugees have sufficient resources to meet their growing needs for housing, education and health care.

In addition, to support countries and regions in the Union, EU bodies have taken steps to allow greater flexibility in the use of cohesion policy funds, for example by extending the possibilities for transferring resources between programmes and obtaining 100% EU funding, as well as providing additional pre-financing for projects to provide immediate support to Member States.

At the time of Russia’s aggression against Ukraine, the EU had identified a total of around €17 billion in funds earmarked for cohesion and post-pandemic recovery, which Member States can reallocate to help refugees in Ukraine address urgent needs such as housing, education, health and childcare. This included unspent 2014-2020 cohesion policy funds of around €7 billion and around €10 billion pre-allocated for post-pandemic recovery under the Recovery Assistance for Cohesion and European Territories (REACT-EU). The EU is also providing assistance to Ukraine through the Civil Protection Mechanism, which to date is the largest operation under this programme.

Assistance through the EU Civil Protection Mechanism amounts to over €516 million.

But EU support for Ukraine will not stop when the armed conflict ends. EU leaders have already talked about support for Ukraine after the end of the conflict and future efforts to rebuild the country. For now, the only certainty is that EU leaders have agreed to set up a trust fund for solidarity with Ukraine and have called for preparations to begin without delay. However, the size of the fund and the concrete measures in which Member States will participate in this reconstruction remain to be determined.