KIEV, Ukraine — For weeks, Ukraine was in a kind of limbo. A way out of ending the war seemed increasingly distant, as peace negotiations with Russia failed to produce any results and ended up suspended. In practice, the country had to prepare to fight indefinitely, even with crucial financial support from the European Union still blocked.
This Thursday (23), this impasse began to break.
After Hungary withdrew its objection to a $106 billion EU loan to Ukraine the day before, European leaders decided to unlock the resources.
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The money, which has been blocked since December, will cover a large part of the Ukrainian government’s financial needs over the next two years. When this amount comes to an end, the expectation is that another US$117 billion, coming from the bloc’s long-term budget, will also be allocated to the country.
Taken together, these commitments give Ukraine a more solid financial foundation at least until 2029, says Hlib Vyshlinsky, director of the Center for Economic Strategy in Kiev. According to him, the pressure is now shifting to Moscow, which is facing increasing difficulties in sustaining its own war effort.
In addition to the loan, the EU on Thursday approved its 20th package of economic sanctions against Russia.
“Impasse resolved,” wrote Kaja Kallas, head of European foreign policy, on social media. “Russia’s war economy is under increasing pressure, while Ukraine gets a major boost.”
The EU’s expanded engagement with Ukraine has largely occupied the space left by the United States under the Trump administration. Last year, European countries accounted for almost all of Kiev’s military, financial and humanitarian support, while American aid plummeted by 99%, according to Germany’s Kiel Institute for the World Economy.
Unlike previous European aid packages, the new loan is heavily geared toward defense spending. Around US$70 billion will be allocated to the Armed Forces, giving Ukraine a substantial budget to purchase expensive anti-aircraft defense systems and expand the production of drones — the country’s main tool today for containing ground advances by Russian troops.
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The loan also gives Kiev something it has almost never had since the start of the conflict: predictability to plan long-term military operations. Until now, international aid arrived in small installments and was largely made up of donations of equipment, and not money that could be directed to the purchase or production of weapons considered a priority.
“It is very important for Ukraine to guarantee this level of financial predictability — after more than four years of large-scale war,” President Volodymyr Zelensky wrote on a social network this Thursday.
The focus on military financing reflects what European and Ukrainian authorities have been repeating privately for months: Ukraine needs to prepare for a long war, strengthening its defenses.
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Russia refuses to accept a ceasefire, and the Trump administration, which has mediated peace talks, has not significantly pressured Moscow to make concessions.
Negotiations are, for now, frozen, while the United States becomes involved in yet another war in the Middle East. Russian Foreign Minister Sergey Lavrov has already stated that resuming dialogue is not a priority for Moscow.
None of this surprises European leaders. “The truth is that Russia never took these talks seriously anyway,” German Defense Minister Boris Pistorius said last week. “That’s why it’s even more important to support Ukraine.”
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Zelensky, in turn, remodeled his own government with the perspective that the conflict should not end anytime soon. He appointed a new Defense Minister, Mykhailo Fedorov, a politician linked to the technology sector and advocate of the massive use of drones as a centerpiece of the Ukrainian military response.
While neither Russia nor Ukraine currently have a clear path to victory, Fedorov says his goal is to make the war untenable for Moscow and force a negotiation.
“The president gave the Ministry of Defense a clear mission: together with diplomacy, strengthen our defense to the point that we force the enemy to accept peace,” he said in February, when presenting his plan.
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The strategy includes expanding air defense capabilities to protect Ukrainian airspace, increasing Russian battlefield losses as much as possible and using long-range weapons to target the country’s oil industry, one of the Kremlin’s main sources of revenue.
The interest-free EU loan — which Ukraine would only need to repay if Russia is forced to pay war reparations — will help finance this strategy.
According to Valdis Dombrovskis, European Commissioner for Economy, the resource will be released over the next two years, in equal installments. In the first year, around US$33 billion will be allocated to military spending and US$20 billion to civilian spending. He also said that the first tranche should arrive in Ukraine between the end of May and the beginning of June, with part of the money already planned to boost drone production.
Today, according to Zelensky, Ukraine manufactures almost 1,000 interceptor drones a day — used to shoot down missiles and other aerial weapons. With the new funding, the country could double this production and improve the protection of its own airspace. “We really need this money,” the president told CNN. “It’s literally a question of survival.”
Despite the advance, Ukraine remains dependent on weapons systems produced exclusively by Western countries, such as the US-made Patriot missiles — the only anti-aircraft defense system capable of shooting down ballistic missiles.
Zelensky stated that European resources will be used both to strengthen the local arms industry and to “buy, together with partners, weapons that we have not yet produced in Ukraine”.
The country also intends to prioritize repairing and strengthening its energy infrastructure before next winter, after having suffered from recurring Russian attacks on the sector in the last cold season.
In total, the EU estimates that the new loan will cover about two-thirds of Ukraine’s external financing needs — both military and civilian — for the next two years, estimated at $135.7 billion. The remaining third must come from institutions such as the International Monetary Fund (IMF).
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