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EU Approves €90 Billion Loan for Ukraine and New Russia Sanctions After Druzhba Oil Pipeline Dispute Resolved

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EU Approves €90 Billion Loan for Ukraine After Pipeline Dispute Resolved

"The EU asked Ukraine to repair the Druzhba oil pipeline, which had been destroyed by Russia. We have repaired it. We hope the EU will also deliver on the agreed commitments."
— President Volodymyr Zelenskyy

European Union member states' envoys gave preliminary approval on Wednesday for a €90 billion ($106 billion) loan to Ukraine, formally approving the package on Thursday. The decision followed the resumption of Russian oil deliveries through the Druzhba pipeline to Hungary and Slovakia, ending a months-long political deadlock. EU countries also agreed to the bloc's 20th package of sanctions on Russia.

Pipeline Dispute Resolution

Timeline of Events

  • January 27: Oil shipments through the Druzhba pipeline to Hungary and Slovakia were interrupted. Ukrainian officials attributed the damage to Russian drone attacks.
  • Late January: A section of the Druzhba pipeline, which transports Russian crude through Ukrainian territory into Central Europe, went offline. Ukraine stated the damage resulted from a Russian attack in western Ukraine.
  • February: Hungarian Prime Minister Viktor Orbán vetoed the €90 billion EU loan for Ukraine, citing Ukraine's alleged shutdown of the Druzhba pipeline.
  • April 12: Orbán lost Hungary's parliamentary election to center-right challenger Peter Magyar. The leader of the winning party has stated he will not block EU funds for Kyiv, though he is only expected to take power next month.
  • Wednesday: Ukrainian officials stated the pipeline had been repaired and operations restarted. Hungarian energy group MOL confirmed receiving crude at pumping stations in Hungary and Slovakia.
  • Thursday: Oil flows resumed at 2 a.m., according to the Slovak economy ministry. European Union ambassadors approved the loan package.

Statements on Pipeline Status

Ukrainian President Volodymyr Zelenskyy stated on Tuesday that the Soviet-era Druzhba oil pipeline, damaged in late January by Russian drones, was repaired and could resume operations. He said flows were expected to restart "in the coming hours."

Slovak Prime Minister Robert Fico had previously set a firm condition: "The government of the Slovak Republic will not agree to a sanctions package in favour of Ukraine unless there is a genuine reopening of the Druzhba oil pipeline." On Thursday, Fico welcomed the resumption of oil flows as "good news," expressing hope for a "serious relation between Ukraine and the European Union."

Hungarian Prime Minister Viktor Orbán had accused Ukraine of deliberately delaying pipeline repairs, a claim Ukraine denied.

EU Loan Package Details

"Promised, delivered, implemented."
— European Council President António Costa

Funding Allocation

The €90 billion ($106 billion) loan is intended to support Ukraine's economic and military needs for two years. Ukrainian officials stated that approximately two-thirds of the funds will be allocated to Ukraine's defense sector.

Yuriy Sak, an adviser to Ukraine's Ministry of Strategic Industries, noted that Ukraine's defense industry is capable of producing $50 billion worth of weapons, but the government can currently only purchase $15 billion. Loan disbursements are expected to start flowing in the coming weeks and months.

Approval Process

  • The written procedure started on Wednesday afternoon during a meeting of EU ambassadors in Brussels.
  • Member states had up to 24 hours to register objections.
  • Cyprus, which holds the EU Council's rotating presidency, expected the procedure to conclude on Thursday afternoon.
  • Hungary and Slovakia could still prevent adoption by unanimity if they chose to, but diplomats believed that was unlikely following the resumption of oil flows.

Background on Loan Delay

The EU initially agreed to the loan in December to maintain Ukraine's liquidity through 2026 and 2027. Hungary had blocked the loan for months, with Orbán accusing Ukraine of blocking oil flows through the Druzhba pipeline for political reasons. The delay came while U.S. aid to Ukraine was largely cut off. The EU originally intended to use frozen Russian assets as collateral, but Belgium blocked that option.

EU Sanctions on Russia

20th Sanctions Package Details

  • Full ban on maritime services for Russian oil tankers
  • Targets over 40 ships believed to be part of Russia's shadow fleet illicitly transporting oil
  • Asset freezes on approximately 60 additional entities, adding to over 2,600 sanctioned Russian officials and entities
  • Targets several banks and imposes a ban on Europeans using Russian cryptocurrency

Sanctions Background

The EU had initially aimed to adopt the sanctions package to mark the fourth anniversary of the Russian invasion on February 24. The package had been delayed by the dispute with Hungary and Slovakia. The measure on maritime services had been conditional on a G7-level agreement after Malta and Greece voiced concerns. The G7 deal was unlikely to happen soon, given the White House's recent decision to extend sanctions relief for Russian oil.

Statements from Officials

European Council President António Costa emphasized advancing Ukraine's EU accession.

President Volodymyr Zelenskyy thanked EU partners, stating the funds would strengthen Ukrainian forces and boost production.

Cypriot Finance Minister Makis Keravnos confirmed: "Loan disbursements will start flowing as soon as possible."

Heorhii Tykhyi, spokesperson for Ukraine's Ministry of Foreign Affairs, described the loan as "money intended to defend Europe from the Russian threat," adding that the lack of funds had been harmful to certain defense projects.

Related Context

  • Hungary and Slovakia remain the sole EU countries significantly reliant on Russian oil delivered via the Druzhba pipeline, which has a capacity of 1.2 million to 1.4 million barrels of oil per day.
  • Both countries were granted exemptions from the EU's ban on Russian oil imports due to their landlocked status and lack of alternative suppliers.
  • Pipeline flows had fallen to a small fraction of capacity due to Western sanctions and repeated disruptions from drone attacks.
  • Ukraine depends on electricity imports for winter, with approximately 45% of these imports originating from Hungary.
  • The Ukrainian section of the Druzhba pipeline transported over 9 million tons of oil to Slovakia and Hungary last year.