The EU proposed a new financing plan for Ukraine for 2026-2027: two key mechanisms.

According to ТСН: The European Union is taking decisive steps to provide lasting support for Ukraine, despite the situation on the front lines. The European Commission has officially presented a new proposal package aimed at meeting Kyiv's financial needs for 2026-2027. The main goal is to provide Ukraine with resources for defense and state functioning at a time when Russia shows no readiness for peace negotiations.

Two funding pathways

Brussels offers two legally formalized mechanisms that can serve as alternatives or complement each other:

1. EU borrowing. This option is based on the European Union’s budget. The EU raises funds from international markets backed by guarantees from its budget to pass them on to Ukraine.

2. Reparations Loan. This is an innovative approach allowing the European Commission to borrow leftover funds from EU financial institutions where frozen assets of the Russian Central Bank are held.

Ursula von der Leyen, the President of the European Commission, noted that these decisions will strengthen Kyiv's negotiating position.

"We propose to create a Reparations Loan using leftover funds from frozen Russian assets in the EU... We are increasing the cost of aggressive war for Russia. And this should become an additional incentive for Russia to sit at the negotiating table," she stated.

Protection against Kremlin retaliation

The proposals also include safeguards. Europe is aware of the risks: Russia may attempt to confiscate the assets of European companies on its territory or file lawsuits in supportive jurisdictions.

Therefore, a solidarity mechanism is envisioned, backed by national guarantees from member states or the EU budget, to protect European financial institutions from possible "retaliatory actions" from Moscow. It is also proposed to legally prohibit the return of frozen assets back to Russia until the country pays reparations.

Summit of EU leaders

These proposals will still need to be approved. The European Commission urges the European Parliament and the EU Council to act quickly. EU leaders are expected to seek a clear agreement on this plan at the summit on December 18-19.

Valdis Dombrovskis, Vice President of the EC, summarized the mood in Brussels:

"The fates of Europe and Ukraine are intertwined... Our proposals comply with international law, maximize pressure on Russia, and send a clear signal that its aggression will not prevail."

It is also known that Norwegian Finance Minister Jens Stoltenberg stated that Norway will not use its sovereign fund to guarantee EU loans for Ukraine. The decision regarding support for financing Ukraine will depend on the format of this initiative agreed upon by the European Union.

This demonstrates the EU's resolve in supporting Ukraine amid ongoing aggression. The proposal package aims not only at financing but also at creating legal mechanisms that will reduce risks for European companies. The approval of these initiatives during the December 18-19 summit will be a significant step towards ensuring stability and security in the region.