Analysis-EU grapples with future of military aid for Ukraine

By Andrew Gray

BRUSSELS(Reuters) – A standoff between Germany and other European Union countries has cast uncertainty on the future of an EU military aid fund that has bankrolled billions of euros in arms for Ukraine.

While Berlin and many other EU nations say they are strongly committed to keeping up weapons supplies to Kyiv, the bloc’s members have been wrangling for months over how best to do so.

EU leaders will discuss the issue at a summit on Thursday, which will also try to reach agreement on a four-year plan for 50 billion euros ($54.23 billion) of economic aid for Ukraine.

Most EU countries are ready to inject 5 billion euros into the military aid fund to help Kyiv but Germany wants changes to the fund first, according to diplomats, who say they are unsure whether a deal will be reached at the summit.

The standoff is part of a broader debate over how to get arms supplies to Ukraine on a long-term footing, given added urgency by struggles to get aid for Kyiv through the U.S. Congress and the possibility of a second Trump administration.

The tussle over military aid reflects tensions over burden-sharing, with German Chancellor Olaf Scholz having publicly accused most EU countries of not providing enough for Ukraine.

German officials have voiced frustration that they have pledged 8 billion euros in bilateral military aid for Ukraine this year but are also on the hook for the biggest payments into the European Peace Facility (EPF) fund – while other countries have promised far less for Kyiv.

The spat also raises questions about EU aspirations to become a single heavy hitter on the world stage, with a bigger defence role, rather than a collection of 27 nations where military policy is mainly the domain of national governments.

“Europeans are at a juncture, in the sense that they are learning the hard way to talk the talk and walk the walk on security issues,” said Camille Grand, a defence expert at the European Council on Foreign Relations and former senior NATO official.

CASHBACK SCHEME

At the heart of the debate is the EPF, which operates as a giant cashback scheme, giving EU members refunds for sending munitions to other countries.

The EU has given more than 5 billion euros to the fund for Ukraine aid since Russia’s all-out invasion in February 2022.

Countries pay into the fund according to their economic size and get payouts based on the aid they donate.

The fund accounts for a only a fraction of overall European aid to Ukraine. But its use for the war was a landmark moment.

For the first time, a bloc that had long shied away from hard power gave offensive weapons to a country at war. And the move sent a signal to Kyiv, Moscow, Washington and Beijing that Europe as a whole was stepping up to help Ukraine.

But now countries are arguing over its future role as Europe’s military aid effort for Ukraine moves from providing munitions from stocks to placing new orders with arms firms.

Some see it as an effective way to keep channelling aid to Ukraine and a blueprint for greater EU defence cooperation.

“The EPF is the only thing that functions, the only thing that we can build on,” said Kusti Salm, the top civil servant in Estonia’s defence ministry.

But the fund has also attracted controversies.

EU members have clashed over the amounts some were claiming in refunds for sending old stock to Ukraine.

As the fund operates on unanimity, Hungary has been able to hold up 500 million euros in payouts to other EU members for Ukraine aid for more than six months.

Berlin has demanded big changes, suggesting bilateral aid should be taken into account when determining contributions.

“It is crucial for Ukraine that military aid reaches it without delay,” said Michael Clauss, Germany’s ambassador to the EU. “Bilateral support is quick and direct, and should be considered as an equivalent contribution under EPF rules.”

French President Emmanuel Macron said in Stockholm on Tuesday he was ready to reform the EPF but did not go into detail. He has floated the idea of EU bonds to fund a boost in the bloc’s own defences and get more arms to Ukraine.

In recent days, the EU’s diplomatic service has suggested ways to overcome stumbling blocks with the EPF: Hungary’s cash could go to aid for countries other than Ukraine and bilateral aid could be “offset” against contributions.

But it is unclear how those ideas would work in detail.

Smaller countries are arguing strongly for the EPF to continue to fund Ukraine aid. The say being part of a bigger pool means their cash can be spent more quickly and effectively.

“It’s just like with COVID and vaccines – if we don’t have a European purchasing mechanism, we’re at the back of the line,” said Lithuanian Foreign Minister Gabrielius Landsbergis.

“Without some European mechanism, I’ve been joking that we’re going to purchase tents and pocket knives.”