EU Breaks Deadlock on €50 Billion for Ukraine After Orban Caves
Alberto Nardelli, Jan Bratanic and Ellen Milligan
Thu, February 1, 2024
(Bloomberg) -- European Union leaders clinched a deal on a €50 billion ($54 billion) financial aid package for Ukraine after Hungarian Prime Minister Viktor Orban caved to their demands and lifted his veto.
The agreement proves “that we stand by Ukraine and I think it will be an encouragement for the US also to do their fair share,” Ursula von der Leyen, European Commission president, said after the meeting in Brussels as US funding remains stalled in Congress.
As part of the accord, the member states agreed to debate the implementation of the Ukraine aid package every year and, “if needed,” the commission, the bloc’s executive body, could be asked to propose a review in two years. Orban’s demand for a veto was dropped.
The agreement was salvaged in a morning gathering Orban had with Chancellor Olaf Scholz, French President Emmanuel Macron and Italian Prime Minister Giorgia Meloni, according to people familiar with the meeting. Leaders at the extraordinary summit — some of whom accused Orban of “blackmail” — had braced for a deadlock after weeks of negotiations produced no result.
The moment is crucial for Ukraine, which has warned that its coffers are emptying as it grapples with a shortage of weapons to fend off the Russian military campaign. Kyiv is still awaiting more than $60 billion in assistance from the US, yet to be backed by Congress.
“We negotiated a review mechanism that guarantees that the money will be used rationally,” Orban said in a Facebook video after the agreement was reached. He also hailed the positive market reaction to the deal.
Thursday’s breakthrough avoided a messy split within the EU, papering over mounting concern that Western support for Kyiv is splintering. It also marks a significant boost for Ukrainian President Volodymyr Zelenskiy. The bloc’s leaders said the breakthrough should send a signal to Washington, where funds proposed by President Joe Biden are being held up over a fight with Republican lawmakers.
“The American president is a truly good friend and ally who’s trying to get approval in Congress,” Scholz told reporters after the meeting. “I hope that today’s message will help him to have it a bit easier at home for his agenda.”
Hungary’s forint gained 0.2% against the euro, reversing a drop earlier in the session. Ukraine’s international bonds were the top gainers across emerging-market dollar debt Thursday, with the Ukrainian dollar note due in Sept. 2034 up more than 1 cent on the dollar to 24.2 after the deal.
The agreement hinged on Orban, who angered his counterparts in the 27-member bloc by stonewalling a pillar of Europe’s security strategy aimed at containing Russian President Vladimir Putin. EU leaders made little effort to veil their frustration at the 60-year-old Hungarian leader.
“Viktor definitely wants to be the center of attention every time we’re here, but it shouldn’t be like this,” Estonian Prime Minister Kaja Kallas told reporters earlier Thursday. “I don’t want to use the word ‘blackmail,’ but I don’t know a better word.”
Ukraine’s weapons inventories are diminishing as Russia’s invasion heads into a third year. Reports from the frontlines suggest Ukraine is struggling to hold Russian forces back, while an ugly dispute has broken out between Volodymyr Zelenskiy, and his commander-in-chief, Valeriy Zaluzhnyi — heightening the sense of crisis in Kyiv.
Ukrainian Defense Minister Rustem Umerov sent a sharp warning to his EU counterparts this week that his country’s forces are now out-gunned three to one by the Russians. In a letter seen by Bloomberg, he added that Kyiv needs at least 6,000 artillery rounds daily, but is unable to shoot more than 2,000 shells along a 1,500-kilometer (932-mile) front.
The EU is still withholding two-thirds of the more than €30 billion in EU funding for Hungary on rule-of-law and graft concerns. Continued obstructionism also threatened to jeopardize Hungary’s rotating EU presidency from July and potentially scupper the bloc’s agenda in the second half.
Adding to the tense atmosphere inside the EU’s summit are protests by farmers, who staged a demonstration nearby — with Brussels’ city center full of tractors parked near EU institutions — to protest the bloc’s green policies and trade liberalization measures.
Some of the protests, which have spread across Europe over the past months, have been supported by organizations with ties to Orban.
--With assistance from Lyubov Pronina, Ewa Krukowska, Max Ramsay, Maria Tadeo, Katharina Rosskopf, Andras Gergely, Piotr Skolimowski, Natalia Ojewska, Milda Seputyte, Natalia Drozdiak, Jorge Valero, Samy Adghirni, Stephanie Bodoni and Zoltan Simon.
(Updates with comments encouraging US to move on funding, Ukrainian bonds, from second paragraph.)
Most Read from Bloomberg Businessweek
Alberto Nardelli, Jan Bratanic and Ellen Milligan
Thu, February 1, 2024
(Bloomberg) -- European Union leaders clinched a deal on a €50 billion ($54 billion) financial aid package for Ukraine after Hungarian Prime Minister Viktor Orban caved to their demands and lifted his veto.
The agreement proves “that we stand by Ukraine and I think it will be an encouragement for the US also to do their fair share,” Ursula von der Leyen, European Commission president, said after the meeting in Brussels as US funding remains stalled in Congress.
As part of the accord, the member states agreed to debate the implementation of the Ukraine aid package every year and, “if needed,” the commission, the bloc’s executive body, could be asked to propose a review in two years. Orban’s demand for a veto was dropped.
The agreement was salvaged in a morning gathering Orban had with Chancellor Olaf Scholz, French President Emmanuel Macron and Italian Prime Minister Giorgia Meloni, according to people familiar with the meeting. Leaders at the extraordinary summit — some of whom accused Orban of “blackmail” — had braced for a deadlock after weeks of negotiations produced no result.
The moment is crucial for Ukraine, which has warned that its coffers are emptying as it grapples with a shortage of weapons to fend off the Russian military campaign. Kyiv is still awaiting more than $60 billion in assistance from the US, yet to be backed by Congress.
“We negotiated a review mechanism that guarantees that the money will be used rationally,” Orban said in a Facebook video after the agreement was reached. He also hailed the positive market reaction to the deal.
Thursday’s breakthrough avoided a messy split within the EU, papering over mounting concern that Western support for Kyiv is splintering. It also marks a significant boost for Ukrainian President Volodymyr Zelenskiy. The bloc’s leaders said the breakthrough should send a signal to Washington, where funds proposed by President Joe Biden are being held up over a fight with Republican lawmakers.
“The American president is a truly good friend and ally who’s trying to get approval in Congress,” Scholz told reporters after the meeting. “I hope that today’s message will help him to have it a bit easier at home for his agenda.”
Hungary’s forint gained 0.2% against the euro, reversing a drop earlier in the session. Ukraine’s international bonds were the top gainers across emerging-market dollar debt Thursday, with the Ukrainian dollar note due in Sept. 2034 up more than 1 cent on the dollar to 24.2 after the deal.
The agreement hinged on Orban, who angered his counterparts in the 27-member bloc by stonewalling a pillar of Europe’s security strategy aimed at containing Russian President Vladimir Putin. EU leaders made little effort to veil their frustration at the 60-year-old Hungarian leader.
“Viktor definitely wants to be the center of attention every time we’re here, but it shouldn’t be like this,” Estonian Prime Minister Kaja Kallas told reporters earlier Thursday. “I don’t want to use the word ‘blackmail,’ but I don’t know a better word.”
Ukraine’s weapons inventories are diminishing as Russia’s invasion heads into a third year. Reports from the frontlines suggest Ukraine is struggling to hold Russian forces back, while an ugly dispute has broken out between Volodymyr Zelenskiy, and his commander-in-chief, Valeriy Zaluzhnyi — heightening the sense of crisis in Kyiv.
Ukrainian Defense Minister Rustem Umerov sent a sharp warning to his EU counterparts this week that his country’s forces are now out-gunned three to one by the Russians. In a letter seen by Bloomberg, he added that Kyiv needs at least 6,000 artillery rounds daily, but is unable to shoot more than 2,000 shells along a 1,500-kilometer (932-mile) front.
The EU is still withholding two-thirds of the more than €30 billion in EU funding for Hungary on rule-of-law and graft concerns. Continued obstructionism also threatened to jeopardize Hungary’s rotating EU presidency from July and potentially scupper the bloc’s agenda in the second half.
Adding to the tense atmosphere inside the EU’s summit are protests by farmers, who staged a demonstration nearby — with Brussels’ city center full of tractors parked near EU institutions — to protest the bloc’s green policies and trade liberalization measures.
Some of the protests, which have spread across Europe over the past months, have been supported by organizations with ties to Orban.
--With assistance from Lyubov Pronina, Ewa Krukowska, Max Ramsay, Maria Tadeo, Katharina Rosskopf, Andras Gergely, Piotr Skolimowski, Natalia Ojewska, Milda Seputyte, Natalia Drozdiak, Jorge Valero, Samy Adghirni, Stephanie Bodoni and Zoltan Simon.
(Updates with comments encouraging US to move on funding, Ukrainian bonds, from second paragraph.)
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Tom Porter
Wed, January 31, 2024
Ukraine's President Volodymyr Zelenskyy gestures as he thanks MPs after his virtual address to the Greek Parliament in Athens on April 7, 2022.LOUISA GOULIAMAKI
Joe Biden is sending weapons to Greece, which is then sending its own to Ukraine.
Greece is reported to have missile-defense systems vital for Ukraine.
Republicans in Congress are blocking a large Ukraine aid bill.
Joe Biden appears to have found a way around the Republican Party's blockade of Ukraine aid using a little-known presidential power.
In a letter to Greek Prime Minister Kyriakos Mitsotakis, reported by Greek media, Secretary of State Antony Blinken said the US would send Greece a batch of weapons and equipment free of charge under the Excess Defense Articles law.
The rule states that the US president can authorize the transfer of weapons deemed to be surplus to US requirements to other countries for little or no money.
Under the deal, the US will send Greece two C-130H aircraft, 60 Bradley armored fighting vehicles, 10 engines for P-3 patrol planes, three Protector-class ships, and a consignment of transport trucks. That's in addition to selling Greece a fleet of 40 F-35 fighter jets for $8 billion.
The transfer was first reported by Forbes, citing Greek media reports.
But as a condition of the transfer, Blinken said, Greece should explore ways of providing weapons from its own arsenal to Ukraine, with Greek daily Kathimerini reporting that Greek military leaders have privately agreed to do so.
"We continue to be interested in the defense capabilities that Greece could transfer or sell to Ukraine," Blinken writes, and dangled the prospect of new, lucrative weapons deals if Athens agrees.
"If these capabilities are of interest to Ukraine, and pending an assessment of their status and value by the US government, we can explore opportunities for possible additional Foreign Armed Forces Financing of up to $200 million for Greece."
According to the report, Greece has weapons such as the S-300 missile-defense systems and Hawk surface-to-air missiles that would prove valuable to Ukraine in its war against Russia.
Kurt Volker, a former US Special Representative for Ukraine Negotiations, wrote for the European Center for Policy Analysis recently that the Excess Defense Articles law was one of a number of tools available to Biden to keep weapons to Ukraine flowing.
But, said Volker, "none of these are ideal," and the best way to get Ukraine the support it requires is to pass a new Ukraine aid bill.
"These improvisations will not produce enough equipment or money to sustain Ukraine's war effort," noted Mark Cancian of the Center for Strategic and International Studies, of the Excess Defense Articles law and related measures, though can help plug equipment shortages.
To deal comes as Republicans in the House of Representatives continue to block a $66 billion aid package to Ukraine, amid partisan squabbling over linked border security measures.
The value of weapons that can be transferred under the Excess Defense Articles law is capped at $500 million.
According to reports, Ukraine is running low on vital supplies of ammunition and equipment as it battles a Russian offensive.
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