Key facts
- The UK has joined the EU's €90 billion loan for Ukraine.
- The loan aims to cover Ukraine's financial and defense needs through 2027.
- British defense companies can now bid for contracts funded by the loan.
- The UK will contribute financially to the loan's interest costs based on contracts secured by its firms.
- The EU loan includes a provision for Ukraine to purchase defense equipment.
The United Kingdom has formally joined the European Union's €90 billion loan package for Ukraine, a move that will allow Ukraine to purchase defense equipment from British manufacturers on more favorable terms. The agreement, reached on July 13, enables British defense companies to bid for contracts funded by the loan, which is intended to cover Ukraine's needs through the end of 2027.
Under the terms of the deal, the UK will make a financial contribution to the loan's interest costs, proportionate to the value of contracts secured by its industry. This arrangement follows a previous attempt by the UK to join an EU defense financial instrument that stalled over contribution disagreements. Negotiations for the current agreement have been ongoing since May, with a diplomat noting increased goodwill and lessons learned from prior discussions.
The EU's loan to Ukraine, approved in April, earmarks €60 billion for defense products. Previously, purchases were restricted to components sourced from EU, Ukrainian, or Norwegian manufacturers, with limited exceptions for third countries. The new agreement unlocks billions in potential investment for British defense firms, supporting jobs and national security, according to Prime Minister Keir Starmer.
The repayment of the loan by Ukraine is formally linked to Russia agreeing to war reparations. The EU also holds approximately €210 billion in immobilized Russian Central Bank assets, which could be utilized to offset shortfalls in reparations, though a direct conversion of these assets into financial support for Ukraine was previously vetoed by Belgium.