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.