EU Approves €90B Loan for Ukraine After Pipeline Resumes

The European Union formally approved a €90 billion loan for Ukraine on Thursday, April 18, following the resumption of Russian oil flows through the Druzhba pipeline to Hungary and Slovakia. This decision comes after months of political deadlock and marks the EU's 20th package of sanctions against Russia.

The €90 billion loan, agreed upon by all EU member states in December 2023, covers around two-thirds of Ukraine's financing needs for 2026 and 2027. The remaining one-third is expected to come from other countries supporting Ukraine, including Canada, Japan, Britain, and Norway. Most of the funding will be allocated to Ukraine's defense sector.

EU ambassadors gave preliminary approval on Wednesday, April 17, with final sign-offs expected by Thursday afternoon. Hungary lifted its veto over the loan and sanctions after a dispute over the damaged oil pipeline was resolved. The Druzhba pipeline, which has a capacity of 1.2 million to 1.4 million barrels a day, resumed operations on April 23.

Ukrainian President Volodymyr Zelenskyy expressed optimism about the future relationship with Hungary and emphasized the importance of peaceful coexistence between neighboring countries. The loan approval is seen as a signal of a more constructive relationship with the EU following the ouster of Hungarian Prime Minister Viktor Orbán earlier this month.

The sanctions package marks the fourth anniversary of Russia's full-scale invasion of Ukraine on February 24. EU envoys adopted the package after Slovakia and Hungary dropped their opposition. European Council President Antonio Costa stated that the EU's strategy for a just and lasting peace in Ukraine rests on strengthening Ukraine and increasing pressure on Russia.

The financial package was held up by outgoing Hungarian Prime Minister Viktor Orbán, who demanded oil start flowing again before the loan could be paid out. Orbán had been fiercely opposed to adopting more sanctions until flows resumed. EU foreign policy chief Kaja Kallas emphasized the importance of the loan for Ukraine's immediate needs and as a sign that Russia cannot outlast Ukraine.

The first shipments via the pipeline were expected in Hungary and Slovakia by Thursday, April 18 at the latest. The resumption of oil flows brought to an end months of deadlock over the €90 billion loan. Ukrainian officials have repeatedly called on Europe to diversify energy supplies and not resume flows via Druzhba from Russia.

EU foreign policy chief Kaja Kallas posted online that the 'deadlock is over' and emphasized that Russia's war economy is under growing strain while Ukraine receives a major boost. The loan approval comes at a time when the United States has largely cut off support to Kyiv and eased sanctions on Russian oil exports amid the US-Israeli war on Iran.

The new round of economic punishment for the Kremlin targets Russia’s energy, banking, and trade sectors. Measures include clamping down further on the so-called 'shadow fleet' of ageing tankers that Moscow uses to skirt oil-export restrictions and curbs on Russian cryptocurrency traders. The EU stopped short of imposing a full maritime service ban for vessels carrying Russian crude but hopes to get Group of Seven (G7) partner nations to go ahead together on it at a later date.

The bloc also announced it was stopping sales of certain machinery to the Central Asian nation Kyrgyzstan to prevent the products from going to Russia. This marks the first time the EU has used a mechanism to halt entire categories of exports to a specific country to avoid sanctions circumvention.