Understanding the New Ukraine Assistance Fund: A Game-Changer in EU Support to Ukraine?

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After some nine months of intense diplomatic negotiations, the Ukraine Assistance Fund (UAF) has finally found its place in the EU legal framework. A political agreement was reached at ambassadorial level in COREPER on 13 March, and EU Foreign Ministers formally finalised it in the form of a Council Decision at the Foreign Affairs Council on 18 March 2024 (here). This post aims to understand the legal features of the new fund in the context of EU assistance to Ukraine, in order to shed light on its objective contribution to the EU’s response to Russia’s illegal invasion of Ukraine and the construction of a more supranational Common Foreign and Security Policy (CFSP).

The Ukraine Assistance Fund is a specifically developed envelope worth 5 billion within the existing European Peace Facility (EPF) to step up the EU’s military support to Ukraine to a new, next phase. As the High Representative pointed out, the consensus on this new financial section confirms the EU’s unwavering support for Ukraine for as long as it takes: ‘The message is clear: we will support Ukraine with whatever it takes to prevail’ (here). Technically, the UAF is not therefore a new EU instrument to be added to the CFSP toolbox. Rather, it is designed as a ‘dedicated amount’ to support the Ukrainian Armed Forces in defending its citizens and regaining territorial sovereignty against Russia’s illegal invasion of Ukraine, which recently celebrated its second anniversary.

The decision-making process of the European Peace Facility is fully applicable to the Ukraine Assistance Fund. As a result, the UAF reflects the intergovernmental nature of the CFSP, where Member States retain full control over the entire decision-making process. At the operational level, UAF’s decisions are taken by the Facility Committee, which consists of one representative per Member State and requires unanimity. Moreover, the obligation for abstaining countries to redirect the funds from the abstained assistance to another assistance, which must be communicated in writing to the Council in due time, further strengthens (and confirms) the direct link between the national interests of states and the ultimate destination of the committed funds.

With the UAF, EU Foreign Ministers gave the green light to increase the financial ceiling of the EFF by €5 billion, bringing it from the original €5.5 billion to a total of €17 billion in current prices for the period 2021-2027. This is the fourth time that the EU has increased the EFF floor, as the massive mobilisation of financial resources for Ukraine has effectively depleted it, with the EU committing 92% of the funds in 2023 alone. However, in contrast to previous actions, the new replenishment will be entirely dedicated to Ukraine under the Ukraine Assistance Fund. Truth be told, the EU is expected to further increase the UAF by agreeing a €5 billion tranche next year, thus consolidating the more ambitious initial proposal of a €20 billion Ukraine Assistance Fund between 2024 and 2027, i.e. €5 billion per year.

The UAF pot projects the EU’s military assistance to Ukraine into a ‘more structured, efficient and pragmatic approach’, encouraging joint procurement from the European (and Norwegian) defence industry and meeting the real needs of the Ukrainian armed forces. The UAF will be used to finance both lethal and non-lethal military assistance and training to Ukraine. Although it will be up to the EPF Facility Committee to determine in detail how the UAF will be distributed ‘no later than one month after 18 March 2024’, it is clear that the multi-dimensional financial cascade of the UAF will affect the entire spectrum of EU military assistance to Ukraine, from the use of existing stocks to bilateral and joint procurement, as well as EUMAM Ukraine.

The reform of the European Peace Facility has been proposed for months, but the lack of political unity has made it difficult to achieve. The High Representative proposed its establishment as early as July 2023 in order to make EU support to Ukraine more sustainable and predictable in the long term (here). Against this background, the European Council reiterated the need both to reform the EPF and to increase its overall funding by March 2024 as necessary conditions for the EU to continue to provide timely, predictable and sustainable military assistance to Ukraine (here and here). Nevertheless, the adoption of the UAF was repeatedly derailed by political blockages, with Hungary being the only country to “constructively” abstain from its formal adoption under Art. 31(1) of the Treaty on European Union (TEU) (here).

In addition, a complex and long-negotiated compromise on which contracts are covered by the UAF has made the decision-making process less straightforward than expected, leading to the introduction of the so-called ‘Buy European’ clause. According to this provision, joint procurement contracts concluded by Member States outside the European defence industry (and Norway) will only be eligible for reimbursement under the new UAF only if European defence companies are unable to supply the same requested orders ‘within a time frame compatible with Ukrainian needs’. However, this flexibility for non-European orders is not unlimited, but is limited to the so-called transition period, the duration of which is not specified, but left to the discretion of the Facility Committee, which will take into account Ukraine’s priority military needs and the European (and Norwegian) defence industry’s capacity to meet them in a timely manner. As a result, unilateral or joint procurement from the European defence industry (and Norway) must become the norm in the medium term, in line with the recently adopted European Defence Industrial Strategy (EDIS), which aims to strengthen the readiness of the European Defence and Technological Industrial Base (EDTIB) to respond to the new geopolitical security environment caused by Russia’s invasion of Ukraine.

In conclusion, the Ukraine Assistance Fund is clearly an important step forward in EU military assistance to Ukraine, ensuring greater predictability. Its adoption comes at a critical time for the fate of Ukraine. According to the latest figures, Ukraine has gone from firing over 7,000 rounds per day in 2023 to just 2,000 rounds per day in 2024, while Russia has doubled its capacity to fire artillery rounds per day from less than 5,000 rounds in 2023 to 10,000 rounds in 2024 (here). A revision of the EPF was not only politically desirable but also legally hoped for, in order to adapt the EU’s military ambitions to a more competitive and resilient European defence industry and more cooperation between Member States in the procurement of defence equipment. Meanwhile, the UAF lacks the foresight and, more importantly, the financial resources to provide a serious response to Ukraine’s needs. In this sense, the window opened by the confiscation of windfall profits from frozen Russian assets could be an important source of funding for the UAF in the coming months (here). What is certain, however, is that the UAF is an important legacy of the current High Representative, Josep Borrell, for the next ‘Europe’ that will be forged by the political elections in June 2024.

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