EU agrees to unblock €90bn loan for Ukraine after Hungary lifts veto

Original article by Jon Henley Europe correspondent

EU member states have reached agreement on unblocking an urgently needed €90bn (£78bn) loan for Kyiv and a new package of sanctions against Moscow after Ukraine resumed pumping Russian oil to Hungary and Slovakia, prompting Budapest to lift its veto.

Cyprus, which holds the bloc’s rotating presidency, said member states’ ambassadors had agreed to launch “written procedures” for the final approval of the loan and the sanctions package, with formal signoff on both due by Thursday afternoon.

The EU agreed in December on the loan, vital to keep Ukraine afloat this year and next, but Hungary’s outgoing prime minister, Viktor Orbán, backed by Slovakia, vetoed it in March because of a dispute with Kyiv over a damaged oil pipeline.

Orbán, who lost to a centre-right challenger, Péter Magyar, in elections on 12 April, accused Ukraine of deliberately delaying repairs to the Druzhba pipeline which carries oil to Hungary and Slovakia, both of which are heavily dependent on Russian oil.

Kyiv said the pipeline, which has a capacity of 1.2m to 1.4m barrels a day and became one of the most politically charged pieces of infrastructure in Europe, had been badly damaged by Russian drone strikes and was being repaired as fast as possible.

Hungary’s MOL oil firm said early on Wednesday afternoon it had been told by Druzhba’s Ukrainian operator that crude oil was arriving via the pipeline from Belarus and was “expected in Hungary and Slovakia by tomorrow at the latest”.

Ukraine’s president, Volodymyr Zelenskyy, welcomed the news as “the right signal under the current circumstances”, adding that both “support for Ukraine and pressure on Russia” were needed for Moscow to end its war.

Zelenskyy said Ukraine was fulfilling its obligations in its relations with the EU, including on the Druzhba pipeline, and it was now important that the European support package “becomes operational swiftly”.

The row over the loan, which aims to cover two-thirds of Ukraine’s financing needs in 2026 and 2027, also delayed new sanctions against Moscow that the EU had hoped to adopt for the fourth anniversary of Russia’s full-scale invasion of February 2022.

Orbán’s heavy election defeat after 16 years in power had fuelled EU hopes that the funds would be unlocked, but officials had expressed concerns that the bloc might have to wait until Magyar took office in May before it could be approved.

Orbán had the power to block the loan even though he – like the similarly Moscow-friendly governments of Slovakia and the Czech Republic – secured exemptions meaning none of the three countries will participate in the joint borrowing.

The EU will provide Ukraine with two interest-free loans of €45bn each in 2026 and 2027, with €28bn reserved for military spending and €17bn for general budget needs each year. The money will be borrowed on capital markets backed by the EU budget.

Economists have said Ukraine could start to run low on money by June without the EU loan. The bloc’s economic commissioner, Valdis Dombrovskis, said on Tuesday the first disbursement was likely to be made at the end of May or in early June.

Ukraine is not expected to pay the money back from its own funds, with the capital only due when Russia starts paying reparations once the war is over – potentially using the estimated €210bn of its central bank assets frozen in the EU.

The scheme was designed last year as a way of making use of the frozen Russian funds to help Ukraine without actually confiscating the cash, a move that Belgium and several other EU member states had viewed as legally hazardous.

According to a draft, the EU’s 20th sanctions package against Moscow includes further maritime and energy restrictions aimed at limiting Russia’s ability to export oil, as well as a financial sector crackdown and trade and industrial bans.

More than 40 additional ships are to be added to the 600-strong list of vessels banned from EU ports and a comprehensive ban is to be introduced on maritime services such as insurance, brokering and technical management linked to Russian oil transport.

About 120 individuals and entities including 20 Russian regional banks have been added to the sanctions list, with travel and transaction bans and asset freezes intended to complicate domestic and cross-border settlement for Russian businesses.

Crypto platforms and digital assets will also be targeted, as will third-country banks that facilitate trade in restricted military goods, and about €930m of goods have been added to import and export bans.

Separately, the German government said the German subsidiary of Russia’s state-owned oil company Rosneft had told it the flow of oil from Kazakhstan through the Druzhba pipeline to a refinery in eastern Germany would be halted from 1 May.

The PCK refinery near the Polish border, one of Germany’s largest, supplies much of the Berlin region with fuel, but the government’s spokesperson in Berlin, Stefan Kornelius, said the change would “not significantly restrict refinery operations”.