Billions from the EU also flowed through the Druzba along with oil

Shortly after Russian oil flowed again through the Ukrainian section of the Druzhba pipeline yesterday, after a months-long interruption, EU ambassadors meeting in Brussels approved a 90 billion euro ($105,79 billion) EU loan, which Kiev urgently needs.

Ukrainian President Volodymyr Zelensky said the EU's decision was "the right signal in the current circumstances." Zelensky, speaking on the X network, said that incentives for Russia to end the war in Ukraine "can only arise when both support for Ukraine and pressure on Russia are sufficient." The Ukrainian president said his country was honoring its obligations in relations with the EU, even "on controversial issues such as the operation of the Druzhba oil pipeline." "We are counting on Europe to provide what is necessary for the effective protection of life and progress in Ukraine's full European integration. It is important that the European support package is implemented quickly," Zelensky added.

EU ambassadors yesterday approved, in addition to the loan to Ukraine, the 20th package of sanctions against Russia, the Cypriot EU presidency announced. The written procedure for the final adoption of the two measures is expected to be completed today, the statement added.

As the war with Russia enters its fifth year, Ukraine faces a huge budget deficit and needs at least $52 billion in external financing this year to cover the budget deficit. Funding from the EU, Kiev's main patron, is crucial to Ukraine's ability to maintain its defenses and ensure the functioning of public services.

Ukraine relies on international financing to cover social and humanitarian spending, in addition to military aid, Reuters reminds, adding that since the beginning of the Russian invasion in February 2022, Ukraine has received more than $174 billion in foreign financial assistance from partners. Since the beginning of this year, it has received $5,5 billion in foreign financial assistance, the central bank said in March.

Analysts say that even a possible peace agreement would not remove the financial pressures on Kiev, while economists warn that without an EU loan, Ukraine could start running out of money as early as June.

European Commissioner for the Economy Valdis Dombrovskis said on Tuesday that the EU would likely make the first disbursement from the loan in late May or early June. He said it would cover Ukraine's general budget spending needs in 2026.

Dombrovskis said that 45 billion euros of the total EU loan will be disbursed in 2026 and another 45 billion euros in 2027, of which 28 billion euros are intended for military needs and 17 billion euros for general budgetary purposes.

The EU, however, still needs to ensure that its international partners commit to the remaining third of the financing needed for 2027, on top of the EU loan, Dombrovskis said.

The EU reached an agreement in principle on the loan last year to maintain Ukraine's liquidity through 2026 and 2027, but it was blocked by Hungarian Prime Minister Viktor Orban and the Slovak government, accusing Ukraine of delaying repairs to the pipeline, a charge Kiev denied.

Ukraine's prospects for getting the loan improved when Orban lost Hungary's parliamentary elections on April 12. The leader of the winning party, Peter Magyar, said he would no longer block EU funds for Kiev, even though he is not expected to take power before next month.

European Union leaders decided last December to borrow jointly to lend Ukraine the money to finance its defense against Russia this year and next, using frozen Russian assets as a possible guarantee that Moscow would eventually pay.

Ukraine is not expected to repay the money from its own resources, as the principal would only become due when Russia pays war reparations after the end of the conflict.

Russia has frozen Central Bank assets worth around €210 billion in the EU that could be used to repay the debt. The scheme is designed to effectively use frozen Russian funds to help Ukraine without formally confiscating the money, as such a move has been rejected as legally risky.

The idea of ​​joint EU borrowing at the expense of the Union budget initially seemed unfeasible, as it required unanimity and was met with opposition from Orban.

The EU will provide interest-free loans for 2026 and 2027 based on the Union's borrowing on capital markets, supported by the EU's budgetary reserve, i.e. the difference between the maximum amount the EU can request from member states and the amount needed to cover planned expenditure.

Hungary, Slovakia and the Czech Republic, whose governments are considered closer to Moscow, have won exemptions, meaning they will not participate in joint borrowing.