Why Russia welcomes Ukraine’s €90bn EU loan
· Yahoo NewsIt was Voltaire who wrote “le mieux est l’ennemi du bien” to describe why chasing an ideal outcome might not garner the best results.
The French philosopher’s argument that “perfect is the enemy of good” was adopted by Ukraine to describe a €90bn (£79bn) loan agreed by the European Union in the early hours of Friday morning.
After some 16 hours of wrangling, the bloc dropped plans to fund the borrowing using hundreds of billions of euros worth of Russian assets frozen on the continent. The Kremlin jumped for joy.
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Instead, EU leaders agreed to use joint debt to channel the interest-free €90bn loan to Kyiv over the next two years, a much-needed lifeline for its war-stricken economy.
Under the plan, some €210bn (£184bn) in Russian assets would remain immobilised indefinitely, or at least until Moscow pays reparations for its full-scale invasion.
It was a night that tested the EU’s unity and created a long list of winners and losers.
The loudest of the cheers came not from Kyiv, but from Moscow.
Ukraine
Ukraine will receive €90bn in funds it doesn’t already have and desperately needs ahead of a springtime budget crunch next year.
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The war-torn nation will only have to pay Brussels back the money should Russia agree to pay reparations.
Sergiy Kyslytsya, Ukraine’s deputy foreign minister, who channelled his inner Voltaire, wrote online that the money would support his country’s “needs to keep protecting Europe while defending itself”.
“There are moments when one should keep in mind that ‘Perfect is the enemy of good’. It was a long night for European leaders but they were able to come up with a workable result,” he added.
Volodymyr Zelensky said he was “grateful.”
“Thank you for the result and for unity. Together, we are defending the future of our continent,” he wrote on X.
Russia
In Russia, the response was one of celebration.
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Kirill Dmitriev, Vladimir Putin’s ⁠special envoy for investment and economic cooperation, said that “law and sanity” won, after it was agreed to borrow money, rather than raid the Russian assets.
“Major BLOW to EU warmongers led by failed Ursula – voices of reason ⁠in the EU BLOCKED the ILLEGAL ​use of Russian reserves to fund Ukraine,” ⁠Dmitriev said ​on X, mentioning Ursula von der Leyen, the president of the EU Commission.
Putin claimed the EU had failed to rob the frozen assets due to Russian threats of legal action against governments and companies seeking to seize them to fund Ukraine.
But the Russian president was simply putting on a brave face for the camera in his traditional end-of-year interview with a much-loved propagandist.
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The reality is that Russia is no closer to reclaiming the €210bn in sovereign assets it has frozen in Europe.
Ukrainian officials are confident the €90bn loan will be used to good effect, and could help their country’s armed forces out-last Russia in a war of attrition, should Putin continue to refuse a ceasefire.
Moscow’s economy is creaking, its sovereign wealth fund depleted, taxes on the rise and inflation spiralling.
It is Kyiv’s assessment that Putin cannot afford to go on indefinitely with his attempted conquest of their country.
The Telegraph also reported on Thursday that an attempt by Moscow to use US-led peace talks to reclaim those frozen assets had been removed from the latest ceasefire proposal.
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Their assets may not have been plundered, but they are still under significant economic pressure.
Germany and the EU
Failure to tap into Moscow’s frozen assets for the agreed loan was a major setback to Friedrich Merz, the German chancellor, and Mrs von der Leyen.
The pair had spent months championing the reparations loan plan, including ganging up on Belgium to drop its long-held objections to the scheme.
“Of course some people did not like it … they want to punish Putin by taking his money,” Bart De Wever, the Belgian prime minister, said of the compromise deal.
Behind the scenes, member states, even if supportive of the reparations loan, were uncomfortable with the fact that Mrs von der Leyen had come out in such vocal support of the German position.
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Traditionally, smaller capitals rely on the European Commission to protect it from the Goliath that is Berlin in the bloc’s decision-making processes.
As a consolation prize for Germany, EU leaders agreed to reconsider using the frozen assets to repay the loan at a later date.
Ultimately, common sense prevailed, there was no way the bloc’s political chiefs could have walked away from the negotiating table without a significant package of funding for Kyiv.
Belgium
Belgium, however, proved it can punch above its weight.
Diplomats had spent the hours before the agreement claiming there was no way Belgium, the home to the EU’s main institutions, could push back so hard against an EU plan.
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It had railed against the plan to use frozen Russian assets because it is the home to the largest tranche of immobilised funds, and feared the legal recourse threatened by Moscow.
Belgium had been asking for “uncapped” guarantees from other member states that they would cover the cost of repaying Russia should it mount a successful legal challenge.
In secret, Belgium, Italy and France began to work on a “plan B”, using the bloc’s unspent budget funds to underwrite a loan to Kyiv.
“It emerged as the most realistic and the most practical solution,” Emmanuel Macron, the French president, told reporters.
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It was an undesirable option for most but Hungary, Slovakia and the Czech Republic outrightly said they would reject it.
Without the support of these pro-Moscow capitals, the loan would not pass, because it required unanimous backing from member states.
Instead, they were handed a carve-out that the loan would “not have any financial obligations of Czech Republic, Hungary and Slovakia”, according to a statement issued by EU leaders.
Viktor Orbán, the Hungarian prime minister, said: “We have endured a long and challenging night . . . We did not allow Europe to issue a declaration of war on Russia by using Russian assets.”
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America has not played a major role. Reports suggesting Donald Trump was opposed to the plan to hand over Russian assets were described as Russian disinformation. On the contrary, Scott Bessent, the US treasury secretary, reportedly told Yulia Svyrydenko, Ukraine’s prime minister, during a meeting on Dec 9 that he approved of the scheme.
Despite the rigmarole, Ukrainian officials will go into peace talks in Miami this weekend knowing they have secured a financial lifeline and Russia won’t be able to access its frozen assets anytime soon.