EU tackles new $20 billion plan to boost Ukraine military aid

European Union officials will this week start tackling a new plan to unlock tens of billions of dollars in military assistance for Ukraine, seeking to revamp a critical aid program bogged down by internal divisions.

The EU move comes after a number of European countries have increased their bilateral military assistance to Ukraine even as the Biden administration is hamstrung by Congress on providing large-scale assistance, The Wall Street Journal (WSJ) reports.

It comes as Ukraine’s military is being pushed onto the defensive across parts of the front line. In the absence of fresh U.S. assistance, Ukrainian and Western officials warn that Russia has a large and growing advantage in manpower, ammunition and other basic war materials.

“Given the dependence of Ukraine on external support, the choices made by the EU member states and partners in the coming period will either allow Ukraine to decisively progress or will seriously undermine its ability to resist,” the proposal says.

Separately, the North Atlantic Treaty Organization plans on Tuesday to announce what it is billing as “a major new investment in artillery ammunition,” seeking to boost production of 155-millimeter artillery shells. Ukraine is running low on the ammunition, its leaders have said. 

EU leaders will also meet on Feb. 1 to try to agree on a 50 billion-euro economic package for Ukraine.

Germany, Britain, the Netherlands and Sweden are among the countries that have recently pledged billions of dollars in new bilateral military assistance packages for Kyiv. But the EU-wide military assistance program for Ukraine has hit major problems.

If the new EU plan wins approval, it foresees more than 20 billion euros of EU funds being fed back to member states for tens of billions euros of military assistance they give to Ukraine over the next four years. The plan emerged from weeks of debates between the EU and its member states. A confidential draft of the plan, viewed by The Wall Street Journal, was formally circulated on Friday.

Early in Russia’s war against Ukraine, Europe for the first time started using EU funds on a large scale to pay for lethal military assistance through the bloc’s European Peace Facility. That proved highly successful for a year, with 5.5 billion euros in funds being repaid to member states who supplied Kyiv largely from their existing stocks of weapons, ammunition, tanks and air defence missiles.

But since early last year, the EPF program has run aground. Hungary’s Russia-friendly government has blocked any disbursement from the fund for member states for more than six months, demanding an unrelated concession from Ukraine.

A number of EU member states are believed to have depleted stocks to a level where they can’t provide significant new levels of assistance and Germany, which is surging its bilateral military assistance for Ukraine, is objecting to also paying close to a quarter of the EPF bill.

Facing those difficulties, the EU’s external service proposal suggests starting a dedicated Ukraine military fund, which would absorb around 6.5 billion euros in the EPF’s assets and be given up to 5 billion euros a year between 2024 and 2027.

The idea would be to use that money to compensate countries for joint procurement among several member states of military assistance such as ammunition, drones and air defence missiles to give to Ukraine.

The rest of the money would be used to pay the burgeoning costs of the EU’s military training program for Ukraine, which has already trained 40,000 combatants. There would be a transition period before the new plan takes effect.

The EU paper gives a rough estimate that it could offer compensation on military assistance valued at 7.5 billion euros to member states this year. 

The EU proposal comes after German Chancellor Olaf Scholz, whose government is doubling bilateral military assistance to Ukraine this year despite tight budget restraints, urged other EU countries to do more to help Kyiv militarily. He called for an audit of EU military assistance thus far decided, something the EU is now conducting.

The new plan, which would face the significant hurdle of requiring unanimous backing from member states, offers several advantages.

It would allow smaller member states with low munitions stocks to combine their resources in joint procurement to make a bigger impact in helping Ukraine. The new fund would make it easier for European governments to work collectively with Ukraine on what material it most needs. The design of the fund could avoid the regular disbursements that Hungary has frequently blocked or used as leverage to demand something in return.

Critically, it would provide a steady flow of demand for military equipment over the next few years, on top of national bilateral assistance for Ukraine, which could motivate Europe’s hesitant defence firms to increase production of critical armaments.

For Germany and some others, their bilateral assistance to Ukraine could be offset against their contributions to the Ukraine fund.

EU officials said member states will begin formal discussions of the plan in coming days and the proposal is likely to be discussed by EU leaders at their Feb. 1 summit. Any final decision however is likely to take weeks.