Europe
Trump’s deal for Ukraine minerals: How will the EU recover its debts?
As US President Donald Trump is expected to sign an agreement with Ukraine that would grant access to the country’s critical minerals, all eyes are on what Brussels will do.
Trump justifies Washington’s demand for access to Kiev’s raw materials or the revenue from their sale by pointing out that US support to Ukraine is largely paid in the form of grants and, unlike others, including the EU, it does not provide a large part of it as loans.
An analysis published in January by the Comité pour l’abolition des dettes illégitimes (Committee for the Abolition of Illegitimate Debt – CADTM), based in Liège, partially confirms this.
According to the analysis, Kiev’s debt to Brussels increased from $5 billion at the beginning of 2022 to $43 billion in November 2024. When loans from the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) are added, the total debt reaches almost $50 billion.
According to CADTM’s calculations, this figure corresponds to approximately 44% of the total external debt of the Ukrainian state, and it appears that more will be added in the foreseeable future.
In 2024, as part of the €50 billion aid package adopted by the G7, the EU will once again provide approximately 85% of its share (€33 billion) as repayable loans. Of this, €12.4 billion has already been paid, so more than €20 billion in debt will be added in the next two years.
As the CADTM analysis also shows, the EU is Ukraine’s largest creditor. 18% of Ukraine’s external debt comes from World Bank loans and 15% from International Monetary Fund (IMF) loans; Kiev has to pay 4% to Canada and 1% to Japan. Approximately 18% consists of debts to private creditors, mainly investment funds such as BlackRock.
CADTM emphasizes that Ukraine has to repay World Bank and IMF loans even during the war; the IMF is said to demand interest rates of up to 8%. Kiev was required to repay approximately $9 billion to the IMF between 2022 and 2024.
It is also known that Ukraine has to fulfill many conditions and implement “reform” measures in return for the granting of loans, which is explicitly requested not only by the World Bank and the IMF, but also by the EU. CADTM, referring to the Ukrainian Ministry of Finance, states that the number of binding conditions and measures to be fulfilled is 325.
With US access to revenues from the sale of Ukrainian raw materials now guaranteed, a source of funding from which Kiev could pay its debts to Brussels is no longer available.
Instead, the EU is likely to have its eye on the Ukrainian defense industry. This sector has grown rapidly since the start of the war. For example, the Stockholm-based research institute SIPRI points out in a recent analysis that the arms company Ukrainian Defense Industry (formerly UkrOboronProm) was able to increase its revenues by 69% to $2.2 billion in 2023 alone.
Smaller arms companies are also booming. For example, the Australian Strategic Policy Institute (ASPI) reports that the number of startups supplying the Ukrainian armed forces more than doubled in 2024 and currently stands at around 1,500. These companies produce a wide range of products, from drones controlled by fiber optic technology, which are therefore considered impossible to interfere with, to remote-controlled machine guns for unmanned ground vehicles and unmanned aerial vehicle defense drones.
SIPRI describes the sector as “dynamic, diverse, and innovative.” It is also emphasized that their products are regularly tested in battle.
Ukrainian officials and industry experts regularly point out that investments in Ukrainian defense companies, especially some new startups, could be very valuable for Western companies in the long term.
Some Western European companies, including the German defense giant Rheinmetall, have now established themselves in Ukraine. To date, the volume of investment is still low; reports indicate that it is at best between $20 and $40 million in total, but there are now signs of a noticeable increase.
Information has also been provided in Germany that the projects of companies considering investing in Ukraine will be guaranteed by the German government with the Ukrainian government. While Germany’s imports from and exports to Ukraine are increasing, almost half (46%) of the companies participating in the survey conducted by the Committee on Eastern European Economic Relations and KPMG are considering investing in Ukraine in the next twelve months, despite the war.
In addition, the Ukrainian defense industry has also begun to hope for profitable arms exports. Ukrainian arms manufacturers recently called on the Kiev government to relax the export ban that is still in force due to the war.
In December, an industry representative explained that in some cases production capacities had been created that exceeded the needs of the Ukrainian armed forces, and added, “We propose to export everything that our army does not need or cannot buy in a controlled manner to the countries in the Ramstein Group.”
In this context, there is talk of a potential export of defense equipment worth more than €10 billion. Moreover, production costs in Ukraine are much lower than in Western Europe.
As Ukraine’s arms production increases, taxes and duties pour money into the heavily indebted state treasury, which is said to make it easier to repay billions of dollars in loans from the EU.
The EU’s plan to continue providing arms aid to Ukraine also has a special place. An EU proposal in a brief document seen by Reuters in recent weeks suggests that each member state should meet a financial quota, depending on the size of its economy, to produce a package that includes 1.5 million artillery shells to be delivered this year.
Diplomats said they held initial talks on the plan, first reported by Politico, in Brussels and that EU foreign ministers could also discuss the plan.
The EU External Action Service proposal does not put an estimated value on the package, but diplomats stressed that the aim was to come up with a plan worth billions of euros.
The proposal states that the main objectives of the package will be to supply at least 1.5 million large-caliber artillery ammunition, as well as air defense systems, missiles for deep precision strikes and unmanned aerial vehicles.
According to the proposal, part of the financing could come from the revenue generated from Russian assets frozen in the EU.
Indeed, European Commission President Ursula von der Leyen announced an EU financial aid package of €3.5 billion during her visit to Kiev earlier this week to provide additional liquidity to Ukraine’s struggling budget and to facilitate the purchase of military equipment from domestic industry, among other things.
The €3.5 billion is an advance on a larger aid fund of €50 billion, which the European Union established at the beginning of 2024 and is called the “Ukraine Facility.”
I am able to provide information only up to June 2024, and therefore I cannot provide definitive information about events after that date.
Europe
Fico accuses Merz of blackmail over threat to veto EU budget
Slovak Prime Minister Robert Fico has hit back after German Chancellor Friedrich Merz threatened to veto the EU budget unless funding for Ukraine is secured.
Merz said he would block the EU’s seven-year budget if no agreement is reached on financial assistance for Ukraine.
The chancellor’s intervention has angered Central European leaders who are net beneficiaries of EU funds but do not want to take part in the next round of funding to support Ukraine’s war effort.
“What the chancellor is doing is typical blackmail, and I will not bow to it,” Fico told reporters in Bratislava.
Fico spoke alongside his Czech counterpart, Andrej Babiš, whose government has refused to participate in a future loan to Ukraine.
“I do not know why he said this,” Babiš said, referring to Merz’s stance.
Merz wants EU leaders to discuss Ukraine’s financing needs at a summit in Dublin on Friday.
In a letter to European Council President António Costa, who will chair the meeting, obtained by The Guardian, Merz wrote:
“We must maintain our support for Ukraine in its struggle to defend itself. This is our shared vital interest. Yet bilateral aid provided to Ukraine is distributed unevenly, with the burden shouldered mostly by only a few member states.”
The EU agreed last year to provide a €90 billion loan to Ukraine, intended to cover two-thirds of its military and civilian spending for 2026 and 2027.
Since then, however, Russia’s relentless bombardment has placed a heavier financial burden on Kyiv, prompting President Volodymyr Zelenskyy to ask for €70 billion to plug the budget deficit.
The EU has endorsed Zelenskyy’s figures and pledged to find €45 billion. Ukraine’s other allies, such as Britain and Canada, are expected to cover the rest.
Last year, Merz launched an initiative to tap €210 billion in frozen Russian state assets held in the EU, but the plan fell through due to opposition led by Belgium, which holds most of the funds in Brussels.
The €90 billion loan was the backup plan. Having opted out of that loan, Hungary, Slovakia, and Czechia indicated that they would not take part in the next round either.
Bulgaria joined these three member states following the election of Prime Minister Rumen Radev last April.
The question of funding for Ukraine is now spilling over into the fraught negotiations on the 2028-34 EU budget.
Germany, the largest net contributor, wants substantial cuts to the proposed budget and opposes the EU providing generous funding to member states that refuse to contribute to Ukraine’s financial needs.
Merz states in his letter that a “collective commitment without exceptions” is a “fundamental prerequisite” for closing Ukraine’s financing gap and for “discussing other matters, particularly those with financial implications.”
He also notes that, in the context of the EU’s next seven-year budget, known as the Multiannual Financial Framework, all member states must contribute to a “robust” financial perspective for Ukraine from 2028 onwards.
A German government official said:
“For the Multiannual Financial Framework (MFF) to be successfully concluded, it is vital that all EU member states provide financial support to Ukraine.”
Berlin is also aiming to shift decision-making on funding for Ukraine from unanimity to qualified majority voting, in an effort to prevent a single government from blocking EU decisions.
The letter reflects mounting frustration among the EU’s northern member states, Ukraine’s most generous backers, over lower contributions from other EU countries in Central and Southern Europe.
The task of brokering an agreement on the budget falls to Costa, the former Portuguese prime minister.
Costa wants a deal by the end of the year, ahead of elections in France, Poland, and Italy in 2027 that could complicate the process.
A spokesperson for Costa confirmed receipt of the letter without elaborating on details. “President Costa will dedicate time to the Ukraine issue at the informal European Council meeting in Dublin this week,” the spokesperson said, adding that funding for Ukraine would be addressed at a dedicated summit on the EU budget scheduled for 26-27 November.
Europe
EU expects next Israeli government to adopt less aggressive posture
The EU expects the next Israeli government to mend its “difficult relationship” with Brussels and adopt a more constructive approach toward Gaza and illegal settlements.
Israeli President Isaac Herzog tasked Gadi Eisenkot, the leader of the anti-Netanyahu bloc, on Sunday with forming a government.
Eisenkot stated that the country faces a “catastrophic diplomatic crisis” as traditional allies begin to reassess their relations with Israel.
Speaking to Rapporteur, several European diplomats stationed in Tel Aviv said they expect ties to get back on track.
“Whatever government comes in, we can try to revitalize relations because Israel is clearly a very important partner,” one European diplomat said, adding that Brussels expects the next administration to be “less aggressive”.
The diplomat noted that relations with Europe are currently “not very good”.
Israel cut off communication with Kaja Kallas, the EU high representative for foreign affairs and security policy, after Rapporteur revealed in June that she had compared Israel to apartheid-era South Africa during a visit to Mexico.
The diplomat stated that this decision, taken ahead of elections, was political in nature. A second European diplomat based in Brussels explained that the announcement came only a few days before an official visit by Dubravka Šuica, the European commissioner for the Mediterranean.
“This could have been interpreted as a tactic to divide Europe, but Israel had asked Kallas to deny the report; she did not do so,” the second diplomat said.
Brussels has repeatedly voiced its frustration with Israel over the humanitarian crisis in Gaza and the expansion of West Bank settlements.
However, EU governments blocked almost all sanctions proposed by the European Commission.
A third diplomat said opposition parties would “almost certainly take the issue more seriously” when it comes to tackling violence by West Bank settlers:
“We see Palestinians being expelled from their homes and new illegal settlements being built in the West Bank. There is a reluctance on the part of the current government to address this issue, which causes problems in our relations.”
The new government is expected to ease pressure on Palestinians and halt construction of the E1 settlement project, a controversial plan to build settler housing in the West Bank east of Jerusalem.
“They will probably try to deal with the problem of extremist settlers in the West Bank,” the diplomat added.
On Gaza, the diplomat described the situation as “a complete nightmare”, with two million Palestinians crowded into an area that accounts for roughly 35% of the territory.
“There are not enough tents for the winter, and not enough vaccines are reaching the area despite an increase in diseases,” the diplomat said.
The European official argued that Donald Trump’s peace plan met all the conditions for Europe. Although the EU had much to offer, neither the US nor Israel appeared interested in EU involvement in the process.
“We are currently training Palestinian police in the West Bank, and if permitted, we could do the same in Gaza,” the diplomat said.
The diplomat disclosed that Israel had agreed with Šuica that Europe would finance two projects aimed at improving sewage and water infrastructure in Gaza, continuing:
“However, none of these projects has started yet because there is a serious problem with dual-use goods. Getting materials into Gaza is very difficult because the Israelis say they could be misused if they fall into the wrong hands of Hamas.”
Israel insists that Hamas must be disarmed before subsequent phases of Trump’s plan can proceed.
With disarmament unlikely to happen in the near term, the EU argues that certain measures can be carried out in parallel.
“We can begin rebuilding sanitation systems in Gaza. We can start building desalination plants. We can begin providing energy and water to Gaza,” one diplomat said.
While Brussels hopes for progress on Gaza and the West Bank, it maintains that expectations regarding the establishment of a Palestinian state need to be “managed”.
The EU continues to advocate a two-state solution, yet most leading Jewish parties oppose the creation of a Palestinian state.
The diplomat noted that the next Israeli government will likely have “a very slim majority and not much room for manoeuvre”.
There is also a “major misunderstanding” between the EU and Israel that must be addressed. According to the diplomat, Europeans fail to recognize the “psychological impact” of 7 October on Israelis.
“This event changed the country and made the two-state solution even more distant than before,” the diplomat said.
In return, some Israeli politicians believe Europe has betrayed Israel despite what they view as a fight against “Islamist terrorism”.
“Their argument is that European politicians are somewhat afraid of the Muslim population in Europe,” the European diplomat said.
Europe strongly opposes Iran and the possibility of Tehran acquiring nuclear weapons, imposing sanctions in response.
However, the diplomat argued that the EU would not participate in a war because it lacks a common army:
“We are a diplomatic and economic power, which is why we resort to sanctions and diplomacy. The expectation that we would take part in a military operation is unrealistic.”
Europe
Germany threatens EU budget veto over long-term Ukraine aid
Germany has threatened to veto the European Union’s joint budget for the 2028-2034 period, which is currently under negotiation, unless every member state commits to providing financial support to Ukraine in 2027 and subsequent years, German Chancellor Friedrich Merz warned.
According to a report by the Financial Times (FT), Chancellor Merz set out Berlin’s condition for the budget talks in a letter addressed to European Council President António Costa.
In his letter, Merz wrote: “A collective commitment that every single one of us, without exception, will make a fair contribution to closing Ukraine’s budget deficit is an indispensable prerequisite for resolving this budget issue and, in particular, for addressing subsequent matters that carry financial implications.”
The German Chancellor stressed that a formula backed by all member states must be established to provide Ukraine with a reliable, multi-year financial perspective starting from 2028.
Merz also insisted that any agreed solution must cover the interest payments on debts incurred to finance the assistance provided to Kyiv.
Conversely, several countries within the bloc have cut financial aid to Ukraine, and the number of capitals adopting this stance is projected to rise next year.
In December 2025, Hungary, Slovakia, and the Czech Republic approved the EU’s 90 billion euro loan package for Kyiv only on the condition that they would not contribute to its costs themselves.
Alongside these three countries, Bulgaria has also stated that it does not plan to participate in subsequent financial assistance packages for Ukraine.
In France, far-right leader Marine Le Pen, who could potentially win the presidential election scheduled for spring 2027, recently told the FT that Paris has run out of funds.
Le Pen assessed: “The honest approach is to tell Mr Zelensky clearly, and even warn him: ‘Look, we cannot do more. We have already allocated the 90 billion euro EU loan, in which France’s share amounts to 18 billion euros. 18 billion euros is genuinely a huge amount of money.'”
The EU’s 90 billion euro loan, covering the 2026-2027 period, aims to meet two-thirds of Ukraine’s financing requirements.
Brussels expects the remaining 45 billion euros to be covered by other partners, including Canada, the UK, Norway, Japan, South Korea, and Australia.
Germany remains the largest net contributor to the EU budget.
In contrast, the four Eastern European countries seeking to avoid financing Ukraine rank among the largest net beneficiaries of the bloc’s budget.
Leveraging this balance, Chancellor Merz aims to use his influence in the EU budget negotiations to secure uninterrupted support for Kyiv in 2027 and the years beyond.
According to the FT, Berlin is also demanding that future aid packages be decided by qualified majority voting rather than unanimity, which is required under the current system.
A German government spokesperson told the newspaper:
“The issue of Ukraine’s financial needs must be resolved within the framework of the next EU budget. Financial support for Ukraine from all EU members is decisive for the successful conclusion of the budget talks.”
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