Why is the EU’s wartime loan a vital lifeline for cash-strapped Ukraine?
Kyiv, Ukraine — Cash-strapped Ukraine has secured a vital security EU loan.
which would provide a vital lifeline to sustain its wartime efforts this year.
The 90 billion euro ($106 billion) package was formally approved on Thursday, just days after President Volodymyr Zelensky announced that the Ukrainian section of the Druzhba Pipeline These are conditions attached to the release of funds once repairs have been made and oil will resume flowing to Slovakia and Hungary.
Approval had been stalled for months amid political friction within the 27-nation EU, including resistance from Hungary’s outgoing Prime Minister Viktor Orban, who isconsidered seen as the Kremlin’s closest ally in the bloc. Orban was defeated in an election earlier this month, clearing the way for a breakthrough in talks.
This is the importance of the EU package:
The funding comes at a critical moment. The International Monetary Fund estimates that Ukraine will face a financing gap of about 136 billion euros ($158 billion) over the next two years.
EU debt is expected to cover about two-thirds of Ukraine’s financing needs in 2026 and 2027. Without it, officials have warned that Kiev could run out of resources to maintain basic state functions and its war effort as early as this spring. The first tranche of funding is expected to be released in the coming months.
Ukraine will have access to 45 billion euros ($53 billion) for the remainder of this year and 45 billion euros ($53 billion) for all of 2027.
Under the agreement, about a third of the funds will go to budgetary support for the government of Ukraine, while the remainder will be directed toward defence, arms procurement, and expansion of domestic arms production.
EU leaders agreed to the loan in December 2025, but implementation was halted for months due to a dispute over the Ukraine-linked section of the Druzhba oil pipeline.
In December, the Czech Republic, Hungary and Slovakia agreed not to stop. Their EU partners do not borrow money from international markets unless all three countries have to participate.
The pipeline, which carries Russian oil to Slovakia and Hungary, went offline in late January after Ukrainian officials said it was damaged in a Russian attack. The Hungarian and Slovakian governments accused Ukraine of deliberately cutting off supplies, turning the issue into a wider political standoff inside the EU.
The loan was finally unblocked after Hungary and Slovakia said Ukraine had restored transit this week. Zelenskyy said the repairs had been completed, clearing the final hurdle of approval.
The final step, taken on Thursday, was to unanimously approve changes to the EU’s long-term budget to allow for future spending. This is why we needed to bring Hungary and Slovakia along.
EU leaders have agreed that Ukraine will begin repaying the debt only after Russia pays war reparations.
Instead of using Russia’s frozen central bank assets to guarantee loans, member states chose a more cautious approach. Instead, European leaders decided that they would borrow money to lend to Ukraine.
Concerns over potential Russian retaliation and legal challenges led him to freeze assets until Moscow ends its war and compensates Ukraine for the destruction caused.
