EU pledges to loan Ukraine up to $39 billion to help rebuild its economy and power grid

The European Union pledged Friday to lend Ukraine up to 35 billion euros ($39 billion) under a loan program organized by the Group of Seven major industrialized nations to help the country rebuild its war-torn economy and power grid. .

G7 leaders agreed in June to provide a $50 billion loan to help Ukraine in its fight for survival. Interest earned on profits from frozen Russian central bank assets will be used as collateral, but progress in distributing the loans has been slow.

“We must make Russia pay for the damage it has done,” European Commission President Ursula von der Leyen said at a news conference in kyiv with President Volodymyr Zelensky.

Von der Leyen said the European Union had already provided Ukraine with more than €118 billion ($132 billion) in military and economic aid since the war began in February 2022, “but Russia’s continued attacks mean that further support is needed.”

“What is crucial is that this loan goes directly into your national budget. This will improve Ukraine’s overall financial stability and provide you with significant and much-needed financial space. You will decide how best to use the funds, giving you maximum flexibility to meet your needs,” she said.

The loans will be secured by windfall profits on nearly $300 billion in Russian assets, frozen due to the all-out invasion of Ukraine. The vast majority of this money is held in European Union countries, including Belgium.

Von der Leyen said the EU was “confident that we can provide this loan to Ukraine very quickly.” The 27-nation bloc hopes other G7 countries will follow suit and start offering loans as well.

Zelensky said his priorities were to rebuild Ukraine’s energy grid, build more shelters, improve schools and buy more weapons and ammunition.

Von der Leyen arrived in Ukraine on Friday and focused on helping the country restore and reconnect its power grid and increase its heating capacity as winter approaches.

Nearly half of Ukraine’s energy infrastructure was destroyed during the war with Russia, and frequent power outages leave parts of the east in the dark for up to four hours at a time. That’s equivalent to the entire country of Latvia, Lithuania and Estonia losing electricity, von der Leyen said.

Meanwhile, winter is approaching.

“The heating season starts in two weeks and Russia’s continued attacks on Ukraine’s civilian energy infrastructure are aimed at inflicting maximum damage,” von der Leyen said. “We will support Ukraine in its courageous efforts to overcome this situation.”

The main goal is to help Ukraine decentralize its energy grid and become less dependent on large power plants that make Russian forces easier targets. About 260 missiles were launched in a major attack on energy infrastructure late last month.

The Europeans have already sent more than 10,000 generators and converters and are also providing smaller, more mobile gas turbines. These types of energy-efficient equipment are harder to hit and easier to repair.

Winter in Ukraine lasts from late October to March, with January and February being the harshest months. The Europeans hope to help provide about 25% of the 17 gigawatts of electricity the country will likely need this winter.

One goal of the EU’s aid is to encourage people to stay in Ukraine. About 4 million people have fled since the war began on February 24, 2022, often to Poland and other neighboring countries.

The European Union provides aid, such as short-term help to find housing, jobs or education. But recently, the number of departures has increased. The European Commission, the EU’s powerful executive branch, estimates that 10,000 more people are seeking help each week.

If the influx of migrants continues, it could undermine European support for Ukraine.

The European Commission announced Thursday that it would provide an additional 160 million euros ($180 million) to help strengthen Ukraine’s energy grid. Of this amount, 100 million euros ($112 million) comes from windfall profits generated by the freezing of Russian assets.

Denmark is also making efforts to use these funds to place orders for weapons and military equipment directly to the Ukrainian defense industry.