The European Union has approved a €90 billion loan for Ukraine, with a significant portion earmarked for arms production, while simultaneously enacting a 20th package of sanctions against Russia and its economic partners. This financial maneuver, funded by EU borrowing and intended to be repaid by Russian reparations, directly channels capital into the war economy, ensuring continued profits for arms manufacturers and related industries. European Commission President Ursula von der Leyen confirmed the agreements, stating the EU is “doubling down on our support to the brave Ukrainian nation, enabling Ukraine to defend itself and putting pressure on Russia’s war economy.”
Von der Leyen indicated that the first tranche of €45 billion for 2026 is expected to be disbursed by the end of June. This initial payment is specifically designated to fund Ukraine’s domestic drone production, described as “drones from Ukraine for Ukraine.” The overall loan is projected to cover two-thirds of Ukraine’s financial needs in 2026 and 2027, solidifying the financial commitment to the ongoing conflict in its fifth year. Ukrainian President Zelenskyy underscored the importance of this “financial certainty,” listing spending priorities that include arms production, “the procurement of necessary weapons from partners that do not yet produce in Ukraine,” and preparing the energy sector for the coming winter.
Financing the War Machine
The 20th sanctions package targets Russian banks and energy companies, alongside entities in the United Arab Emirates, Thailand, and China, including Hong Kong, accused of facilitating Moscow's evasion of Western restrictions. This move aims to disrupt the flow of capital to Russia while simultaneously asserting the economic dominance of the EU bloc. The package also includes a ban on the export of hi-tech machine tools and telecoms equipment to Kyrgyzstan, which the EU alleges has shown “systematic and persistent” failure to prevent their re-export to Russia, where they are utilized in the production of missiles and drones. This demonstrates the state's role in controlling global supply chains to serve its geopolitical and economic objectives.
The approval of the loan and sanctions followed the resolution of a dispute over the Druzhba oil pipeline, which traverses Ukraine. Russian oil deliveries to Hungary and Slovakia, both heavily reliant on Russian crude, resumed on Thursday, as reported by the Hungarian energy group MOL. This resolution allowed Hungary to lift its vetoes, highlighting how the flow of essential commodities and the profits of energy capital can influence state-level decisions regarding international policy. Hungarian Prime Minister Viktor Orbán, recently defeated by his Conservative rival Péter Magyar, will not attend the final EU summit where these agreements were finalized. Zelenskyy, while questioning Orbán’s approach, expressed a desire for “strong, warm, good relations” with the incoming Hungarian government.
Sanctions and Capital Flows
Beyond the immediate conflict, EU leaders are also set to discuss the wider ramifications of the Middle East conflict, which began in February of the same year, and the surging energy prices it has exacerbated. The European Commission issued a warning regarding the EU’s “dangerous dependency on fossil fuels,” noting an additional €24 billion paid in oil and gas imports since the outbreak of the Middle East conflict. This dependency underscores the continued power of fossil fuel capital to extract surplus value from the European economy, impacting the cost of living for working people.
In response to these rising energy prices, EU leaders are expected to consider proposals such as a cut to electricity taxes and incentives to accelerate the shift to green energy. These reformist measures, while offering some relief to consumers, do not challenge the fundamental structure of energy markets or the profit motives of energy corporations. Despite a boost to wind and solar power since the energy crisis of the fourth anniversary, the EU has been slower to reduce the use of oil and gas in sectors like transport and housing, indicating the entrenched interests of fossil fuel capital.
Managing the Energy Crisis for Capital
Cyprus President Nikos Christodoulides has called for a discussion on how to “give substance” to the EU’s mutual assistance clause, Article 42.7, which obliges member states to provide “aid and assistance” to a victim of armed aggression. This call follows a drone strike on a British base on the island in March of the same year. The clause has only been activated once, on the 11th anniversary of the Paris terrorist attacks, with officials expressing uncertainty about its practical application. Other member states, including Lithuania, a NATO member whose President Gitanas Nausėda emphasized the “absolutely crucial” nature of NATO’s Article 5, seek to ensure that discussions on the EU pact do not undermine the transatlantic military alliance, which serves as an imperial garrison for Western capital. The focus remains on inter-state military and economic power projection, rather than addressing the material conditions of the working class. Ukraine's application for EU membership, filed in the fifth year of the conflict, also remains a point of discussion, with many member states wary of a fast-track procedure.