(Bloomberg) -- The European Union gave preliminary backing to a non-refundable loan package for Ukraine of up to €35 billion ($38.3 billion) backed by immobilized Russian central bank assets as it seeks to sustain Kyiv’s war efforts.
The member states’ envoys endorsed on Wednesday the new mechanism backed by Group of Seven nations that would use the proceeds derived from the frozen assets to pay back the loan. The approval process, which also requires the European Parliament’s nod, is expected to be completed by the end of October.
The US and the EU had initially agreed on contributing similar amounts of about $20 billion each as part of the G-7’s $50 billion package, but Washington demanded a more durable sanctions regime from Europe to ensure the windfall profits remain available. The current immobilization requires unanimous renewal by the 27 member states every six months.
The EU is in the process of trying to adjust its sanctions regime so it only needs to be renewed every 36 months. A US official said Washington fully intends to participate in the $50 billion commitment to Ukraine but that the scale of its contribution depends on what assurances the EU can give that the Russian assets will remain immobilized.
Hungary, which has often delayed or blocked EU efforts to support Ukraine, has so far withheld backing for changes in the sanctions framework, saying any decision should wait until after US elections on Nov. 5. EU leaders plan to raise the matter with Hungarian Prime Minister Viktor Orban next week during their quarterly summit in Brussels, diplomats said.
Any progress would help provide clarity for G-7 nations, which are expected to complete their pledges to the $50 billion package in a ministerial meeting on Oct. 25.
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