Russia Must Finally Pay
The visit of European Commission President Ursula von der Leyen to Kyiv and Ukrainian President Volodymyr Zelensky’s visit to the United States are aimed at addressing the issue of maintain Ukraine’s resilience. Russia's full-scale invasion of Ukraine has devastated the country’s economy and demands substantial expenditure to fend off the aggressor. More than a third of this funding comes from foreign partners. In 2024, there is a noticeable shift in the sources of financing — Russia must pay for the war it is waging in Ukraine. The key lesson for sustainable democracies is that they must adapt their procedures to respond swiftly when confronting autocratic regimes, and just as quickly, manoeuvre resources to face unforeseen challenges.
It seems that President Ursula von der Leyen's visit to Kyiv on 20 September has outlined a new framework for the EU's financial support to Ukraine. “Relentless Russian attacks mean Ukraine needs continued EU support. The EU Commission will provide a loan of up to 35 billion euros to Ukraine as part of the G7 pledge. This is another major EU contribution to Ukraine’s recovery,” von der Leyen announced on her account X (formerly Twitter). On the same day, President Volodymyr Zelensky stated that these funds would primarily be used for energy and its protection, the construction of bomb shelters in educational institutions, investments in domestic weapons and ammunition production, and the procurement of air defence systems abroad.
Money and weapons are crucial for Ukraine to preserve and restore its territorial integrity. However, it is essential to remember that Ukraine has been defending itself from Russian aggression long before 24 February 2022, when the full-scale invasion began. The first aggressive actions from Moscow took place in Ukraine's Crimea in late February 2014, leading to the annexation of the peninsula. Shortly after, in the spring of 2014, Russian proxies attacked cities in the eastern regions of Luhansk and Donetsk, resulting in the emergence of Russian-backed proxy entities. From February 2014, Ukraine endured eight years of hybrid aggression from Russia, though the scale of armed clashes remained relatively limited.
During these eight years of hybrid war, Ukraine did not receive substantial financial assistance, and arms supplies were nearly non-existent. In fact, the level of external financial support to Ukraine remained roughly the same as in peacetime. This severely restricted Kyiv’s ability to restore its defence capabilities, which had been drastically reduced in the 1990s during the downsizing of Soviet arsenals. It is worth noting that Ukraine gave up its nuclear weapons, as well as effective missile and aviation arms, at the request of European countries and the United States in exchange for assurances that its sovereignty would not be threatened.
Russia, on the other hand, had a different experience with its military potential. Firstly, all the strategic weapons left in Kazakhstan and Ukraine after the Soviet Union’s collapse were transferred to Russia at the request of European countries and the US. Secondly, until the late 1990s, Russia lacked the means to strengthen its military capabilities due to economic problems caused by low commodity prices, oil, and gas. Thirdly, the rapid rise in oil and gas prices in the early 2000s and the establishment of Putin's authoritarian regime allowed Russia to accumulate significant financial resources to rebuild its military strength. The restored military power enabled Putin to begin undermining international law and making territorial claims against neighbours.
Too Late and Too Little
Unfortunately, neither Russia's invasion of northern Georgia in 2008 nor the annexation of part of Ukraine’s territory in 2014 led to significant changes in policy regarding assistance to Ukraine. Changes only started to occur in 2022, following Russia's full-scale invasion of Ukraine. These changes began when the prospect of seeing Russian troops within a few hundred kilometres of European capitals became apparent. However, even then, the supply of weapons and financial support started more slowly than needed. For about four months, Ukraine resisted Russian aggression, relying primarily on its own resources. A significant flow of arms began arriving in Ukraine only in June 2022, and financial aid followed in August of that year.
Support then became more regular, though still insufficient in volume. From time to time, there were interruptions, such as in autumn 2023 and early 2024, when the volume of aid from the US, a critical partner, almost entirely ceased due to challenges in the budgetary process. For instance, between January and March 2024, US aid to Ukraine dropped to around 300 million euros.
This is not just about money but also the supply of weapons, ammunition, and everything else required to resist the aggressor. By mid-2023, the US contribution to Ukraine’s support was almost comparable to that of the European Union. However, from the fourth quarter of 2023, most aid came primarily from the EU — and this pattern continued for about six months. Only in the second quarter of 2024 did US support resume to nearly the same levels seen in 2022 and the first three quarters of 2023.
Photo: Ukraine needs stable financial support from its partners for the sake of global stability. Source: Kiel Institute for the World Economy
Russia as a Donor of Resistance Against Russia
The inertia of state bureaucracies, unfortunately, also plays a role. Budgetary processes in developed democracies cannot happen overnight. Shall we do the maths? Russia invaded at the end of February 2022, which was the time when budgets for the following year, 2023, were being planned. In other words, Ukraine was supposed to receive aid in emergency mode for the first ten months after the full-scale invasion. This explains the relatively large share of loans in the financial flow to Kyiv during that period.
However, by 2023, and even more so in 2024, the proportion of grant support began to increase. For example, in the Ukraine Facility programme, approved by the European Commission in April 2024, it is stated that Ukraine will receive 50 billion euros from the EU in various formats between 2024 and 2027. Of this sum, 38.27 billion euros will go directly to support Ukraine’s state budget, with 33 billion euros in low-interest loans and 5.27 billion euros in grants.
Additionally, Kyiv is receiving significant sums through bilateral agreements with EU countries, as well as the US, the UK, Japan, and Canada.
“Tying financial aid to Ukraine to Russian assets means we have made progress with (Russian) assets,” said Ukrainian Finance Minister Serhiy Marchenko.
The next programme was approved following the European Council meeting on 27 June 2024. As part of this programme, the European Commission is preparing an exceptional macro-financial assistance loan mechanism (MFA) of up to 35 billion euros. Part of this money should be received by Ukraine by the end of the year, with the remainder arriving in 2025. Most importantly, the repayment of these loans is to come from the frozen assets of the Russian Central Bank, which are under sanctions.
Thus, the trend is that, first, the time between decisions and their implementation is indeed shortening. Secondly, the financial burden is being shifted to the aggressor state. How important is this for Ukraine, which now plays the role of a shield between Europe and the aggressor state? According to Ukraine’s Ministry of Finance estimates, agreed with the International Monetary Fund mission in September 2024, Ukraine’s external financing needs for 2025 amount to 38.5 billion US dollars, or approximately 35 billion euros.