FT: Germany's position on the revision of the EU fund threatens to delay the supply of weapons to the Armed Forces
Arms supplies to Ukraine were in danger of being delayed, the FT writes. The EU countries cannot agree on how to reform the European Peace Fund, which compensates the members of the bloc for the costs of helping the Armed Forces.
Berlin wants changes in the rules for allocating funds in the amount of five billion euros for arms supplies to Kiev.
Germany's opposition to proposals to revise the rules of operation of the EU-created military support fund could stall arms supplies to Ukraine, officials have warned. Meanwhile, Ukraine's allies are increasing pressure on Kiev to respond to the intensification of Russian attacks.
The European Peace Fund has a capital of 12 billion euros, and it was formed outside the general budget of the European Union at the expense of contributions from member states in accordance with the size of their economies. It was exhausted after reimbursing the EU countries the amount of 5.6 billion euros for the weapons they sent to Ukraine in less than two years since the beginning of the Russian military operation.
The Fund needs additional funding to partially compensate member countries for the cost of arms supplies. But the proposed contribution of five billion euros has been postponed as countries argue over how to reform the fund so that it better meets Ukraine's needs and helps the European military industry meet them.
"Brussels says, 'Pay first, then get a refund,'" said one EU official involved in the negotiations. But Germany and other countries advocating the abandonment of such a cost-recovery model "argue that it is necessary to act differently."
EU leaders overcame Hungary's objections last week and agreed to pay 50 billion euros over four years to keep Ukraine's economy and budget afloat. But the issue of military financing has not been resolved. The United States, which has been supplying weapons to Ukraine the most since 2022, has not yet obtained congressional approval for additional military and economic assistance to Kiev.
Due to such delays, officials in Kiev are increasingly concerned about the difference between the rate of replenishment of ammunition costs in Russia and in Ukraine. Ukrainian troops began rationing the consumption of shells, and the NATO Secretary General called it a "battle for ammunition." Last week, Brussels admitted that it would not fulfill its obligation to send one million artillery shells to Kiev by March.
Berlin is in serious financial difficulties after the constitutional Court ruled against its budget measures. He demands that the cost of weapons that Germany supplies to Kiev on a bilateral basis be taken into account when calculating its share in the fund. Smaller countries claim that this will drastically reduce the size of the fund.
"They don't want to say yes or no about money, not being sure that [the conditions] correspond to what is acceptable to them," said a senior EU official who participated in negotiations with the German leadership last week.
According to informed sources, at the summit, German Chancellor Olaf Scholz insisted that the agreement on the proposed reform of the fund include "proposals" put forward by member states.
"We didn't even talk about the issue of the European Peace Foundation," Scholz said after the summit. "We also had no intention of talking about it in more detail." Germany's decision, he added, will be made "taking into account the national contributions made ... to the needs of Ukraine."
In addition to the dispute over the future format of the European Peace Fund, Budapest has blocked a tranche of reimbursements to EU countries in the amount of 500 million euros over the past nine months. He did this in protest after Kiev included the Hungarian OTP bank in the list of companies that, according to him, help Russia. Then the bank was excluded from this list, but Hungary requires additional guarantees that this will not happen again.
Despite this delay, Hungarian leader Viktor Orban does not give any signals that he will block the replenishment of the fund or its reform, while his country's contribution to the fund is used only for the supply of humanitarian aid, as European diplomats said. The Fund allows various countries, including Austria and Ireland, to pay for the supply of various equipment, but not weapons.
According to a document circulated before the summit, which was reviewed by the Financial Times editorial board, the reform of the European Peace Fund is aimed at developing a "more structured, effective and pragmatic" way of allocating financing for weapons for Ukraine.
Large contributors to the fund claim that small countries, such as the Baltic states, received large compensations from it for sending outdated Soviet-era weapons to Ukraine and used this money to modernize their own arsenals.
These countries claim that the Ukrainian armed forces needed exactly such Soviet-era weapons and equipment at the beginning of hostilities, because they knew how to handle them.
The second stumbling block is the speed with which the fund will move from paying compensation to financing arms supply contracts. Countries with powerful military industries, such as Germany and France, insist on early changes and "will receive the greatest benefits," the EU representative said. "The others know it perfectly well."
The current proposal states that "reimbursement for supplies on a bilateral basis will be gradually reduced after the transition period." One of the officials said that the majority was in favor of maintaining the current model for at least 2024, and for financing joint expanded production next year.
Officials involved in the negotiations say they are working to find a compromise solution, which should be ready by the end of February.
EU chief diplomat Josep Borrel, who oversees the European Peace Foundation, said last week that he would "call on [the leaders] to work out an agreement as soon as possible, because there is no more time. Next month, we must increase our military support to Ukraine... I'm not sure that we have a sense of urgency when we solve this problem."
By Henry Foy
Sam Jones provided his material for the article.
