Bloomberg: Kremlin-friendly Hungary government wants to hold back some Ukraine aid

Hungary proposed splitting a €50 billion ($52.4 billion) European Union package for Ukraine, adding to concern that economic support for Kyiv may falter after the US dropped fresh money for the war-torn nation in a stop-gap spending package.

Hungary told member states last week that €25 billion would be sufficient for Ukraine at this stage, people familiar with the matter said. The EU should evaluate the contribution halfway through the 2024-2027 disbursement period, when another €25 billion could be provided, depending on Ukraine’s needs, the people added, Bloomberg reports.

Despite broad consensus in the EU for providing support to Ukraine, Hungary’s Kremlin-friendly government has become a difficult partner as it has sought to block aid. Prime Minister Viktor Orban’s government has cited a range of issues, including its own inability to access crucial EU funds due to rule of law and corruption concerns and what it says is its neighbour’s mistreatment of its ethnic-Hungarian minority population.

Coinciding with efforts aimed at pushing Orban to relent, the EU may unblock nearly €13 billion ($13.6 billion) of funding for Hungary this year, according to a person familiar with the discussions. Ukraine is also putting Orban on the spot after removing Hungary’s OTP Bank Nyrt. from its list of “war sponsors,” meeting another key demand of Budapest.

The Ukraine Facility is part of the review of the EU’s long-term budget, which also includes additional funding for migration and cutting-edge technologies totalling €66 billion. The European Commission, the EU’s executive arm, hoped for an agreement by year-end. But the diverging positions on the overall EU budget review — which may undermine the required unanimity it needs to pass — has snarled efforts to reach a timely decision.

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With differences outstanding, EU leaders may not try to have a thorough discussion when they meet later this month and may provide only political guidance to steer the talks, the people said, on condition of anonymity because the deliberations are private.

Member states must also finalize unresolved elements of the Ukraine package, including the role national governments will play in its oversight, the flexibility of the instrument or how to split grants, guarantees and loans, the people added. Hungary is one of the countries calling for a stronger role of member states during the implementation of the facility.

A Hungarian spokesperson in Brussels didn’t reply for comment when contacted by Bloomberg.

The commission wants the facility to strike the right balance between flexibility and predictability to be able to reassure the Ukrainian government without knowing how the war will evolve. Annual disbursements will be decided with national governments each year, partly depending on the contributions from third countries, the people said.

The importance of the EU funding debate has only grown since Sunday’s last-minute US deal to avert a government shutdown excluded $6 billion in aid for Kyiv. US President Joe Biden urged Republican lawmakers to support the funds, adding that they “cannot under any circumstances allow America’s support for Ukraine to be interrupted.”

EU foreign policy chief Josep Borrell told reporters in Kyiv on October 2 that he was sure that the US will reconsider its decision.