Hungary doesn’t want €20B fund for Ukraine military — for now

Hungary is emerging as the biggest hurdle for the EU’s attempt to set up a long-term fund of up to €20 billion to keep Ukraine’s military stocked. 

The plan, first reported by POLITICO earlier this week, was on the agenda for the first time Thursday as foreign ministers met in Brussels. The proposal would set aside at least €5 billion a year for the next four years to help cover the costs of EU countries buying and donating weapons for Ukraine and training Ukraine’s forces.

But during the meeting, Hungary — which has argued Ukraine should stop fighting — said it would object to the fund until Ukraine removes a controversial Hungarian bank, OTP, from its “war sponsors” list. 

Until then, Hungarian Foreign Minister Péter Szijjártó said his country will not authorize more money for the EU’s so-called European Peace Facility — the ironically named fund Brussels has been using to subsidize weapons shipments to Ukraine. 

“We cannot negotiate about new financial EPF commitment before OTP is solved,” Szijjártó said Thursday. 

Thus far this year, the EU has allocated about €4 billion for the military fund since Russia invaded Ukraine. But officials want to establish a more consistent source of money to avoid the need to constantly have difficult conversations about refilling the coffers. 

The push for a years-long fund is part of broader Western efforts to give Ukraine more permanent security assurances, a discussion that dominated the recent NATO summit in Lithuania. 

EU top diplomat Josep Borrell confirmed during Thursday’s meeting that the EU was aiming to add €20 billion to the pot. 

“We proposed the creation of a dedicated session under the European Peace Facility to provide up to €5 billion a year for the next four years for the defense needs of Ukraine,” Borrell said. He explained that the figure is “the valuation of the needs and the costs of our long-term security commitment to Ukraine.”

And inside the room, according to an official briefed on the discussions and speaking anonymously to talk freely, Borrell explained that member states would agree on top-ups on a case-by-case basis depending on events on the ground and on Ukraine’s needs.

The goal is to find a final agreement by October, when EU leaders will next gather in Brussels. And some diplomats think that by then Hungary’s position can evolve.

Foreign and defense ministers will discuss the plan at a meeting at the end of the next month, but the proposal will also have to be discussed by finance ministers. A more detailed plan is expected by the end of August, said the official briefed on the discussion.

Waiting for the details on Thursday, some ministers expressed hesitation about settling on a specific euro figure this early in negotiations. Others have said they want to discuss the figure as part of broader negotiations about the EU’s overall budget. Those talks have also included a Brussels proposal to provide Ukraine with €50 billion in economic aid over the next four years. 

“We need security guarantees for Ukraine, and these security guarantees work best when they go hand in hand [and] are intertwined with what we are doing at the European level,” said German Foreign Minister Annalena Baerbock. 

But “you can’t just float a suggestion,” she added. “Rather this needs to be logically and meaningfully interconnected, and that’s what we’re talking about today and will talk about in the months to come.”

The sentiment is shared by other countries including France, the Netherlands and Austria. 

“It is too early to speak about specific numbers, as there are also other financial needs: macro-financial support, humanitarian aid, reconstruction,” said Austrian Foreign Minister Alexander Schallenberg as he arrived at the meeting.

Yet Ukraine’s closest EU partners, like Lithuania, argued the opposite, saying that even €20 billion shouldn’t be a cap. 

“Surely we will not be opposing this,” said a Polish official, also speaking anonymously to discuss the talks.