European defence firms at centre of Ukraine arms loan dispute

Germany’s effort to link Ukraine’s arms purchases financed by an upcoming €90 billion EU loan to the level of bilateral military aid provided by member states is encountering growing resistance, exposing deep divisions within the bloc over how Kyiv should be allowed to spend the funds, POLITICO reports.

The issue is set to come to a head on January 28, when EU ambassadors meet to finalize eligibility criteria for the loan, which is seen as critical to preventing Ukraine from running out of money as early as April. The debate has become part of a broader political struggle over whether Ukraine should be required to prioritize European defence industries or retain flexibility to procure weapons from outside the EU.

France has led a push to ensure that Ukraine spends most of the funds on arms produced within the bloc, while a group of 19 countries — including Germany and the Netherlands — argues Kyiv must be free to purchase systems elsewhere when European suppliers cannot meet its needs.

Complicating matters further is a German amendment introduced last week that would favor arms purchases from countries that have been more generous in providing bilateral military aid to Ukraine. While some see the move as an attempt to incentivize lagging donors, others view it as a strategic counter to France’s “Buy European” initiative.

Petras Auštrevičius, a Lithuanian member of the European Parliament’s Defence and Security Committee, said he “would support the German proposal” because “the individual member states’ support picture is very uneven.” However, several diplomats said that Berlin’s proposal is unlikely to secure approval.

Germany has been Europe’s largest military donor to Ukraine, allocating €19.7 billion since Russia’s full-scale invasion, according to the Kiel Institute. France has committed €5.9 billion — figures Paris disputes — while Italy has provided €1.7 billion.

At stake is not only which defence industries benefit, but also how much autonomy Ukraine retains over its procurement choices. Several officials warn that restrictive rules could prevent Kyiv from acquiring critical systems, such as air defence interceptors, that are not readily available within the EU.

NATO Secretary-General Mark Rutte urged lawmakers to prioritize Ukraine’s battlefield needs. “If they can buy it in Europe, fantastic — priority one,” he said. “But we all know that without this flow of weaponry from the US, we cannot keep Ukraine in the fight.”

There is also growing support for allowing third countries, including the UK, to participate in contracts funded by the loan. While that proposal is expected to gain traction, a European Commission official was blunt about Berlin’s initiative: “This has never been taken seriously, and I don’t see it happening.”

Belgian lawmaker Wouter Beke summed up the concern shared by many: “Our first line of defence in Ukraine isn’t served by too stringent clauses on what they could purchase — neither from an exclusive ‘Buy European’ perspective, nor from a ‘leaderboard-driven’ mechanism.”

By Vafa Guliyeva