The Council of the European Union on Tuesday formally approved a legal framework for its €90 billion ($106.2 billion) support loan for Ukraine – a decision announced earlier by EU leaders, with the final step now pending approval by the European Commission.
The loan is intended to cover Ukraine’s budgetary and military financing needs as the war with Russia approaches its fifth year. The US withdrew from direct budget aid to Ukraine in January 2025.
Tuesday’s vote implements a political agreement reached by the European Council in December and allows negotiations with the European Parliament to move forward.
The announcement followed months of talks within the EU about a European Commission plan to fund Ukraine’s war effort with a reparations loan backed by Russian assets frozen in Europe. The reparations loan was tabled due to sustained opposition from several EU member states, including Belgium.
Once the remaining legal and budgetary steps are completed, the first tranche is expected to be disbursed early in the second quarter of this year.
The EU Council published a statement on its website on Feb. 4.
The Ukraine Support Loan, as it is called by the EU, is to be be allocated in two parts:
- roughly two thirds of the support – about €60 billion ($70 billion) – will be directed toward support Ukraine’s capacity to invest in defence industrial capacities and to procure military equipment
- the remaining €30 billion ($35 billion) provided as macroeconomic support to Ukraine, channelled via macro-financial assistance (MFA) or implemented through the Ukraine Facility, the EU’s program for reconstruction and macro financial stability.
Disbursements would be made in line with Ukraine’s financing needs, based on a strategy drafted by Kyiv and approved by the Council following an assessment by the European Commission.
Access to the funds would be conditional on reforms linked to the rule of law and anti-corruption commitments, the EU Council wrote.
The interest cost of the loan is planned to be covered by the EU budget, the press release wrote.
Defense procurement rules and third-country participation
According to the EU Council’s press release, defense products financed under the loan would need to be sourced from companies based in the EU, Ukraine, or countries belonging to the European Economic Area and the European Free Trade Association.
Targeted exemptions would apply if Ukraine’s military urgently required equipment not available from those suppliers.
The framework also allows certain non-EU countries to take part in the Ukraine Support Loan for specific defense products. This would apply either to countries that have defense investment agreements with the EU under the Security Action for Europe (SAFE) program, or to partners that have formal security arrangements with the bloc and are providing significant financial and military support to Ukraine. In both cases, the scope of participation would be determined by separate EU decisions.
Next steps: European Parliament talks, Commission approval
The Council will now seek a rapid agreement with the European Parliament on the final legal texts, while also requesting parliamentary consent for amendments to the EU’s long-term budget framework needed to guarantee the assistance.
Once these steps are completed and the European Commission gives its formal approval, the Commission will be able to begin disbursing funds under the scheme.
What is the Ukraine Support Loan?
The Ukraine Support Loan is a €90 billion ($106.2 billion) EU-backed financing mechanism for 2026–27 that will provide long-term loans to help Ukraine cover budget shortfalls and defense needs caused by Russia’s full-scale invasion.
The EU Commission aims to allocate about €60 billion ($70 billion) toward military assistance, with the remaining €30 billion ($35 billion) toward general budget support that seems to be split by €15 billion annually. Although the EU has decided to allocate direct funding for defense for the first time officially, Ukraine’s direct funding to the budget remained underfinanced if speculated from the loan’s split.
Meanwhile, Ukraine’s government needs $74.8 billion to cover 2026-27 only for budget needs. A total of $37.4 billion for 2026-27 is covered, but the same amount is not, the Ministry of Finance told Kyiv Post.
In an interview with Kyiv Post, International Monetary Fund Managing Director Kristalina Georgieva said the gap is expected to be filled through a combination of commitments from Ukraine’s partners, stressing the importance of maintaining security funding while continuing governance and anti-corruption reforms to sustain donor confidence.
The calculations of the Ukraine Support Loan volumes were based on International Monetary Fund (IMF) projections cited by the Council, where Ukraine’s remaining funding needs for 2026–27 amount to €135.7 billion ($160.1 billion), assuming the war ends in 2026.
The EU will gather the capital for Ukraine Support Loan through common EU borrowing on capital markets and guaranteed by the so-called “headroom” of the EU budget, following the model used for earlier assistance instruments such as the Ukraine Facility and Macro-Financial Assistance programs.
Brussels reiterated that Ukraine would only begin repaying the Ukraine Support Loan once Russia compensates Kyiv for the damage caused by its full-scale invasion.