EU to provide Ukraine with €18 billion in financial assistance for 2023, says von der Leyen

Continued support to Ukraine and the bloc’s strategic position against China dominated discussions among EU leaders at the second day of a summit on Friday.

European Commission President Ursula von der Leyen announced that the EU is set to provide Ukraine with up to €18 billion in financial assistance throughout 2023 to cover the basic budgetary needs of the war-torn country.

“It is very important for Ukraine to have a predictable and stable flow of income,” von der Leyen said at the end of two-day meeting of EU leaders in Brussels.

Ukrainian President Volodymyr Zelenskyy said earlier this month his country will need around $55 billion (€56 billion) to sustain next year’s budget deficit and repair damaged infrastructure.

The International Monetary Fund (IMF) has estimated that, for 2023, Ukraine will need between €3 billion to €4 billion in foreign aid on a monthly basis to keep its public services running against the backdrop of Russia’s invasion.

The money is expected to come from the EU, the United States, the United Kingdom and other Western countries, together with international financial institutions.

According to Ursula von der Leyen, the EU aims to contribute with €1.5 billion a month, for a total of €18 billion in 2023. The Commission president did not unveil further details and said work on the future package was still in early stages.

“We have tasked the finance ministers to develop the appropriate mechanism, but it was important to give this signal to Ukraine that we very well know how important this reliable flow of income is,” von der Leyen told reporters.

Until now, the bloc had committed to deliver €9 billion for Ukraine in exceptional loans to help the country support its 2022 budget. The money is being raised by the Commission on international markets and then covered with guarantees using the EU’s common budget and national contributions.

But the release of this macro-financial assistance has been bogged down by discussions between member states, some of whom argue the money should be given in the form of grants, rather than loans.

So far, only €3 billion have reached Kyiv, in addition to a separate €1.2 billion loan, for a total of €4.2 billion.

In a virtual address to EU leaders, President Zelenskyy criticised the delay of the remaining €6 billion.

“Thank you for the funds that have already been allocated, but a decision has not yet been made on the remaining €6 billion from this package, which is critically needed this year,” Zelenskky said on Thursday.

“And it is in your power to reach a principled agreement on the provision of this assistance to our state today already.”

Europe cannot be ‘naive’ toward China

The other main topic of the day for EU leaders was China. 

Despite occupying just a single-line in the nine-page conclusions issued at the end of summit, the discussion among leaders took three hours and was described by French President Emmanuel Macron as “very intense”.

“What emerged from these three hours of discussions is now the unanimity on the need to have a European strategic autonomy,” Macron told reporters.

“We need strategic autonomy and our policy, particularly with regard to China, cannot be dictated by anyone, anymore than it can be part of a form of technological dependence on metals and rare earths,” he added.

The exchange behind closed doors came just days after Xi Jinping secured an unprecedented third term at the helm of the country and as concerns over China’s recent aggressive behaviour or rhetoric towards Hong Kong and Taiwan mount.

For European leaders, it was also an opportunity to refine their joint positions ahead of an EU-ASEAN summit in mid-December.

Charles Michel said the discussions showed that “there is a very, very strong, very, very consensual, very, very convergent conviction that was expressed by all of the 27 European leaders on the importance of really developing this strategic autonomy, this ability to be less dependent from a strategic point of view, to have more independence on a strategic level, but also to strengthen and diversify our partnerships with the rest of the world.”

“It is a debate that has shown our willingness not to be naive but also not to follow a logic of systematic confrontation,” the European Council president added.

‘Europe has historically made a mistake’

The COVID-19 crisis and Russia’s illegal war in Ukraine have starkly exposed the bloc’s dependence on both countries for its energy needs.

Pre-war, the vast majority of European fossil fuel imports came from Russia while China dominates international supply chains when it comes to the mining and refining of rare earth materials, including lithium.

Other issues with China for Europe include respect of human rights, the lack of an even playing field — access to the Chinese market is restricted and highly dependent on the transfer of technology and know how from the European side — as well as blurry lines between companies and the state.

There is also growing concern that Chinese technology giants including Huawei — which supplies 5G infrastructure — have close ties with the country’s intelligence services and over Chinese investments in European infrastructure.

This is particularly important as EU capitals wrestle with the question of how to ensure the protection of critical infrastructure following the suspected sabotage of the Nord Stream pipeline and the German rail network in recent weeks.

Like Michel, Macron also described Europe’s past strategy towards China as “naive” and said that when it comes to critical infrastructures, “Europe has historically made a mistake.”

“During the financial crisis, we pushed several member states in difficult situations in terms of their public finances to sell off infrastructures without any European buyers. And so, on many of these critical infrastructures, it was Chinese players who came to buy.

“Can we blame the authorities for selling ports to electricity, gas or other operators? Can we blame the Chinese? No. We were naive because we considered that, basically, there was a matter of public finance to be settled, that Europe was an open supermarket,” he added.

The EU has reinforced its directive on the protection of critical infrastructure with member states encouraged to roll out stress tests as quickly as possible and the Commission calling for more coordination between countries as these infrastructures are increasingly cross-border.

‘It is in their interest that we are divided’

Some smaller member states have meanwhile called for more unity when it comes to China and to ensure geopolitical concerns trump commercial matters as Germany’s Olaf Scholz prepared to travel Beijing next month.

Germany is China’s biggest European trade partner.

“China is best dealt with when we are 27, not when we are one against one and one vis a vis China,” Latvia Prime Minister Arturs Kariņš stressed.

His Estonia counterpart Kaja Kallas said that “with China, it’s the same as with Russia.”

“It is in their interest that we are divided. It’s in our interests that we are united and talk with one voice. And this is extremely important for small countries who don’t have that power to have that separate relationship.”

“It’s also very important that we don’t have any separate deals made with China, because that would mean that we are weaker as a union,” she emphasised.

The second day of the European Council in Brussels started after a very short night for leaders who agreed at around 2am to call on the Commission to urgently move forward with concrete measures to curb the price of gas and electricity.