Price of Saving Ukraine. On What Conditions EU Allocates €18 Billion to Kyiv

Ukraine surprises the world not only with its stubborn resistance in the war against Russia. It is no less surprising that the state remained manageable and stable during the full-scale war.

Governmental and banking systems work even during blackouts. Ukrainian trains get less later after rocket attacks than Deutsche Bahn after some snow.

According to the report of the Ministry of Finance of Ukraine, budget expenditures in 2022 amounted to UAH 2,704 billion ($75 billion), of which 38.6%, about $29 billion, was funded by partner states. In addition, EU and NATO states provide Ukraine with weapons and humanitarian aid. If we look at all the expenses, the West paid most of the Ukrainian costs.

Western financial and military assistance must continue for Kyiv to win the war. However, the European Union has put forward some conditions to Kyiv in 2023: they will transfer the funds only if reforms are carried out. The war is no longer perceived as a reason to slow down changes in Ukraine.

"European Pravda" has found out the conditions for €18 billion from the EU and what kind of aid Ukraine expects from the West.

No more unconditional aid 

The full-scale war has changed the minds of Western donors for aid to Ukraine.

Kyiv is receiving weapons and ammunition, which it had requested for several years, and this flow does not stop now. Ukrainian partners hand over heavy, high-tech, and expensive military equipment (like the Patriot, worth about $1 billion per battery). It needed time to accomplish such decisions. The cost of weapons the Ukrainian army will receive from partners in 2023 may exceed $40 billion.

Financial assistance has also changed.

In the spring of 2022, the G7 countries decided on joint financial assistance for the Ukrainian economy. The USA and the EU promised to allocate $1.5 billion per month to cover the budget deficit. They agreed on no conditions for the funds to Kyiv. It helped save Ukraine and preserve the controllability of the Ukrainian economy.

However, the EU did not fulfill its political obligations due to internal issues. Ukraine received only €6 billion out of the promised €9 billion. The biggest share of this money was transferred only in late 2022. That's why Kyiv had to carry out emissions, undermining the hryvnia exchange rate.

The only part of the agreement that the Union fulfilled was funding without preconditions, which is unusual for macro-financial assistance.

Given last year's failures, the approval of a new package of €18 billion of macro-financial assistance for 2023 has become a matter of honour for Brussels. They reaches a compromise in late December.

However, a new issue showed up.

"The EU has started putting forward the conditions for the financial assistance" - several EuroPravda sources in the Ukrainian government complained in December.

Negotiations on the criteria for granting the 18 billion euro macrofinancial assistance lasted for several weeks and have already been completed, Deputy Prime Minister Olha Stefanishyna has confirmed to EuroPravda.

"The European Union needs assurance that Ukraine will properly use 18 billion euros. That's why the EU traditionally pays attention to the rule of law and anti-corruption. So these indicators are also on the list," explained Stefanishyna.

These criteria have always been the most difficult for Ukraine. The Deputy Prime Minister hopes that Ukraine will get the entire sum of €18 billion. "One of our main arguments (in negotiations with the European Commission) was that we need these funds for the country to survive," she explained, adding, however, that after the unsuccessful experience of 2022, it is impossible to exclude new problems. "But the European Commission also learned from this experience," added Olha Stefanishyna.

Most important is that Kyiv had to agree: the time of unconditional help is history.

The war was no longer perceived as an excuse for delaying structural reforms. This sounds logical: President Zelenskyy insists that Ukraine should move towards joining the EU even during the war. Therefore structural reforms should resume.