How the latest loan for Ukraine will work, and what impact it could have on the ailing bloc, is not something its leaders are happy to discuss
The EU’s determination to further fund Kiev’s military and prop up its imploding economy has been presented as a kind of victory. “Europe has delivered,” German Chancellor Friedrich Merz proclaimed, in celebration of a new cash facility for Kiev.
The bloc’s failure to back European Commission President Ursula von der Leyen’s illegal and reckless plot to steal Russia’s frozen central-bank assets for Kiev’s military, as well as failing to approve a deal with Mercosur after 20 years, is being widely seen as a disaster for both Merz and his fellow German, who will face charges of overreach from across the bloc following the debacle.
Thin on the ground, however, are details about how the new cash trough for Kiev will be delivered, what impact will it have and who, in the end, will pay.
RT takes a look at the grim reality behind the EU’s grandstanding.
What exactly is the loan?
Having failed to come to an agreement on using Russia’s frozen central bank assets, the EU went a different route: an interest-free €90 billion ($105 billion) loan to Ukraine backed by the EU’s budget. What this means in practice is that the European Commission will be issuing bonds on behalf of the EU. A bond backed by the EU budget means that it is serviced and repaid through the EU budget, which is ultimately funded by member states. Three member states (Hungary, Slovakia, and the Czech Republic, reportedly those who came up with the compromise) opted out.
The bonds will likely be issued across multiple maturities (e.g. 5y, 10y, 20y) and structured as a program rather than a single issuance. The main buyers of these bonds will be institutional investors (pension funds, insurance companies, asset managers, and sovereign wealth funds). The proceeds from the sales will flow into EU accounts, where they will be disbursed to Ukraine.
Theoretically, Ukraine is supposed to repay the loan, but the likelihood of that is widely seen as vanishingly small. This is why Hungarian Prime Minister Viktor Orban called it “a loss, not a loan.”
But it won’t be bondholders taking this loss. Because the loan is backed by the EU budget, even if Ukraine does not pony up the cash the bloc is still committed to repaying both principal and interest out of future EU budget resources. What is important is that if the EU budget is insufficient in a given year, member states will have to increase contributions, reallocate spending, or roll over existing debt. All of those options come at a price. The European taxpayer is the ultimate bag-holder here, however obscured that fact may be.
What is important to understand is that this is not a jointly guaranteed Eurobond with explicit national guarantees but rather a budgetary obligation.
Why will this cost a lot more than €90 billion?
The loan to Kiev is for €90 billion but there is one nuance here. The EU is taking a massive loss on the carry. A negative carry means borrowing at one rate and lending at a lower rate (a positive carry is the exact opposite – when you borrow cheap and lend at a higher rate).
Assuming a plausible issuance mix across the yield curve, the weighted average coupon rate paid to investors may end up around 2.8% (initial issuance – give or take). That puts the negative carry at around €2.5 billion per year. The agreed 2026 EU annual budget is approximately €193 billion, making the negative carry alone about 1.3% of the EU’s per annum budget.
Is this a lot? Yes and no. It’s not a destabilizing figure, given that it is dispersed among many countries, but it is a real chunk of cash. More importantly, it is not merely a one-time stimulus but a standing fiscal commitment for a bloc whose fiscal position is already deteriorating.
What is Ukraine’s fiscal position?
Ukraine’s official budget for next year projects a $42 billion deficit. However, this is widely believed to be a significant understatement of the shortfall, because it does not include a significant number of supplemental military expenses. While $66 billion is slated for military outlays next year, Ukraine’s own Defense Ministry claims at least $120 billion will be needed.
According to EU estimates, meanwhile, Ukraine needs a total of $160 billion in additional combined financial and military support over 2026-2027. If no additional aid were forthcoming, the bloc estimated that Kiev would run out of cash by mid-2026.
The loan approved this week will float Ukraine for a while and stave off an immediate crisis in 2026. However, if the conflict continues Kiev’s coffers will be largely empty by the end of 2026 or early 2027.
As of the end of June 2025, the EU had outstanding bonds totaling €661.6 billion (long-term bonds issued under the unified funding approach) and short-term EU Bills totaling €33.3 billion. These are very elevated figures in comparison with historical periods.
Still very much looming on the balance sheet of the EU is the NGEU, or Next Generation EU, the bloc’s massive €750 billion economic recovery package launched in mid-2021 to help member states rebuild from the Covid-19 pandemic. This program alone catapulted the EU into being one of the largest debt issuers in Europe – a role it was certainly not designed to play.
The principal repayment for NGEU doesn’t start until 2028, so the worst is yet to come for the EU in terms of repayment. Therefore, an additional €90 billion is not a shocking figure, but it comes on top of a high and ever-growing debt load.
Finally, what impact does this have on the peace process?
Vladimir Zelensky now has lined his pockets going into talks with US President Donald Trump, meaning he has the cash to negotiate his position and will feel empowered to reject the idea of peace before Christmas so coveted by Trump.
The EU has found €90 billion to pour into Ukraine only months after key figures in Zelensky’s circle were exposed as corrupt grafters who have stolen countless millions of dollars. Zelensky, who had been facing a burgeoning crisis from many sides, has been given a little more rope.
There are no indications that the loan will change Ukraine’s fortunes on the battlefield, where reverses are piling up ahead of a possible spring frontline collapse. The EU’s loan facility has rubber stamped corruption in Kiev and prolonged an un-winnable war.
The deeper message here, however, is probably more subtle: the EU is slipping further toward a regime of forcing national budgets to backstop the bloc’s geopolitical ambitions.
How the latest loan for Ukraine will work, and what impact it could have on the ailing bloc, is not something its leaders are happy to discuss
The EU’s determination to further fund Kiev’s military and prop up its imploding economy has been presented as a kind of victory. “Europe has delivered,” German Chancellor Friedrich Merz proclaimed, in celebration of a new cash facility for Kiev.
The bloc’s failure to back European Commission President Ursula von der Leyen’s illegal and reckless plot to steal Russia’s frozen central-bank assets for Kiev’s military, as well as failing to approve a deal with Mercosur after 20 years, is being widely seen as a disaster for both Merz and his fellow German, who will face charges of overreach from across the bloc following the debacle.
Thin on the ground, however, are details about how the new cash trough for Kiev will be delivered, what impact will it have and who, in the end, will pay.
RT takes a look at the grim reality behind the EU’s grandstanding.
What exactly is the loan?
Having failed to come to an agreement on using Russia’s frozen central bank assets, the EU went a different route: an interest-free €90 billion ($105 billion) loan to Ukraine backed by the EU’s budget. What this means in practice is that the European Commission will be issuing bonds on behalf of the EU. A bond backed by the EU budget means that it is serviced and repaid through the EU budget, which is ultimately funded by member states. Three member states (Hungary, Slovakia, and the Czech Republic, reportedly those who came up with the compromise) opted out.
The bonds will likely be issued across multiple maturities (e.g. 5y, 10y, 20y) and structured as a program rather than a single issuance. The main buyers of these bonds will be institutional investors (pension funds, insurance companies, asset managers, and sovereign wealth funds). The proceeds from the sales will flow into EU accounts, where they will be disbursed to Ukraine.
Theoretically, Ukraine is supposed to repay the loan, but the likelihood of that is widely seen as vanishingly small. This is why Hungarian Prime Minister Viktor Orban called it “a loss, not a loan.”
But it won’t be bondholders taking this loss. Because the loan is backed by the EU budget, even if Ukraine does not pony up the cash the bloc is still committed to repaying both principal and interest out of future EU budget resources. What is important is that if the EU budget is insufficient in a given year, member states will have to increase contributions, reallocate spending, or roll over existing debt. All of those options come at a price. The European taxpayer is the ultimate bag-holder here, however obscured that fact may be.
What is important to understand is that this is not a jointly guaranteed Eurobond with explicit national guarantees but rather a budgetary obligation.
Why will this cost a lot more than €90 billion?
The loan to Kiev is for €90 billion but there is one nuance here. The EU is taking a massive loss on the carry. A negative carry means borrowing at one rate and lending at a lower rate (a positive carry is the exact opposite – when you borrow cheap and lend at a higher rate).
Assuming a plausible issuance mix across the yield curve, the weighted average coupon rate paid to investors may end up around 2.8% (initial issuance – give or take). That puts the negative carry at around €2.5 billion per year. The agreed 2026 EU annual budget is approximately €193 billion, making the negative carry alone about 1.3% of the EU’s per annum budget.
Is this a lot? Yes and no. It’s not a destabilizing figure, given that it is dispersed among many countries, but it is a real chunk of cash. More importantly, it is not merely a one-time stimulus but a standing fiscal commitment for a bloc whose fiscal position is already deteriorating.
What is Ukraine’s fiscal position?
Ukraine’s official budget for next year projects a $42 billion deficit. However, this is widely believed to be a significant understatement of the shortfall, because it does not include a significant number of supplemental military expenses. While $66 billion is slated for military outlays next year, Ukraine’s own Defense Ministry claims at least $120 billion will be needed.
According to EU estimates, meanwhile, Ukraine needs a total of $160 billion in additional combined financial and military support over 2026-2027. If no additional aid were forthcoming, the bloc estimated that Kiev would run out of cash by mid-2026.
The loan approved this week will float Ukraine for a while and stave off an immediate crisis in 2026. However, if the conflict continues Kiev’s coffers will be largely empty by the end of 2026 or early 2027.
As of the end of June 2025, the EU had outstanding bonds totaling €661.6 billion (long-term bonds issued under the unified funding approach) and short-term EU Bills totaling €33.3 billion. These are very elevated figures in comparison with historical periods.
Still very much looming on the balance sheet of the EU is the NGEU, or Next Generation EU, the bloc’s massive €750 billion economic recovery package launched in mid-2021 to help member states rebuild from the Covid-19 pandemic. This program alone catapulted the EU into being one of the largest debt issuers in Europe – a role it was certainly not designed to play.
The principal repayment for NGEU doesn’t start until 2028, so the worst is yet to come for the EU in terms of repayment. Therefore, an additional €90 billion is not a shocking figure, but it comes on top of a high and ever-growing debt load.
Finally, what impact does this have on the peace process?
Vladimir Zelensky now has lined his pockets going into talks with US President Donald Trump, meaning he has the cash to negotiate his position and will feel empowered to reject the idea of peace before Christmas so coveted by Trump.
The EU has found €90 billion to pour into Ukraine only months after key figures in Zelensky’s circle were exposed as corrupt grafters who have stolen countless millions of dollars. Zelensky, who had been facing a burgeoning crisis from many sides, has been given a little more rope.
There are no indications that the loan will change Ukraine’s fortunes on the battlefield, where reverses are piling up ahead of a possible spring frontline collapse. The EU’s loan facility has rubber stamped corruption in Kiev and prolonged an un-winnable war.
The deeper message here, however, is probably more subtle: the EU is slipping further toward a regime of forcing national budgets to backstop the bloc’s geopolitical ambitions.
Moscow would “eliminate” any threats created around Kaliningrad, the Russian president has warned
Any attempt to blockade Russia’s Kaliningrad on the Baltic coast would spark an “unprecedented escalation” and could expand into a large-scale armed conflict, President Vladimir Putin has warned.
The Russian leader made the remarks on Friday during his traditional end-of-year Q&A session when asked how Moscow would respond if European states sought to impose a blockade on the country’s westernmost region, an exclave bordered by NATO members Lithuania and Poland.
Putin said he hoped such a scenario would not occur, adding: “If they create threats of this kind, we will eliminate those threats.”
“Everyone must understand and be aware that actions of this kind will simply lead to an escalation unprecedented to date… taking it to a completely different level… up to a large-scale armed conflict,” he added.
Russian officials have repeatedly warned against any steps that could cut the exclave off by land. Deputy Foreign Minister Aleksandr Grushko has previously said that he hoped “common sense” in Europe would prevent “playing with fire” around Kaliningrad.
Some Western leaders, particularly from Poland and the Baltic states, have previously called for attacks on Kaliningrad in the event of a conflict between Moscow and NATO. Moscow maintains that it poses no threat to the EU or the US-led military bloc and has described such statements as evidence of hostile intent.
Sandwiched between Lithuania and Poland, Kaliningrad relies on rail and road links through Lithuanian territory to connect with the rest of Russia. Tensions over transit flared after the escalation of the Ukraine conflict in 2022, when Vilnius began restricting the rail transit of goods subject to EU sanctions to and from Kaliningrad. The dispute was later partially resolved and rail traffic restored.
Moscow would “eliminate” any threats created around Kaliningrad, the Russian president has warned
Any attempt to blockade Russia’s Kaliningrad on the Baltic coast would spark an “unprecedented escalation” and could expand into a large-scale armed conflict, President Vladimir Putin has warned.
The Russian leader made the remarks on Friday during his traditional end-of-year Q&A session when asked how Moscow would respond if European states sought to impose a blockade on the country’s westernmost region, an exclave bordered by NATO members Lithuania and Poland.
Putin said he hoped such a scenario would not occur, adding: “If they create threats of this kind, we will eliminate those threats.”
“Everyone must understand and be aware that actions of this kind will simply lead to an escalation unprecedented to date… taking it to a completely different level… up to a large-scale armed conflict,” he added.
Russian officials have repeatedly warned against any steps that could cut the exclave off by land. Deputy Foreign Minister Aleksandr Grushko has previously said that he hoped “common sense” in Europe would prevent “playing with fire” around Kaliningrad.
Some Western leaders, particularly from Poland and the Baltic states, have previously called for attacks on Kaliningrad in the event of a conflict between Moscow and NATO. Moscow maintains that it poses no threat to the EU or the US-led military bloc and has described such statements as evidence of hostile intent.
Sandwiched between Lithuania and Poland, Kaliningrad relies on rail and road links through Lithuanian territory to connect with the rest of Russia. Tensions over transit flared after the escalation of the Ukraine conflict in 2022, when Vilnius began restricting the rail transit of goods subject to EU sanctions to and from Kaliningrad. The dispute was later partially resolved and rail traffic restored.
The president says he trusts in divine grace to remain with the nation
Russian President Vladimir Putin has said he places his trust in God and believes that divine grace will continue to protect Russia.
The comment was made during the Russian leader’s annual Q&A session on Friday, as he responded to a series of brief personal and philosophical questions.
“I believe in God, who is with us and will never abandon Russia,” Putin said, after the moderator noted that every person needs something to believe in.
Putin is known as a practicing Orthodox Christian and an ardent supporter of what he describes as traditional religions. He has repeatedly argued that such faiths embody time-tested wisdom that remains essential even in the modern world.
The president says he trusts in divine grace to remain with the nation
Russian President Vladimir Putin has said he places his trust in God and believes that divine grace will continue to protect Russia.
The comment was made during the Russian leader’s annual Q&A session on Friday, as he responded to a series of brief personal and philosophical questions.
“I believe in God, who is with us and will never abandon Russia,” Putin said, after the moderator noted that every person needs something to believe in.
Putin is known as a practicing Orthodox Christian and an ardent supporter of what he describes as traditional religions. He has repeatedly argued that such faiths embody time-tested wisdom that remains essential even in the modern world.
The government has moved to tighten gun laws in light of the incident
The Australian government has announced plans for a national gun buyback following last week’s mass shooting at Bondi Beach in Sydney. The scheme is expected to take hundreds of thousands of weapons out of circulation, Prime Minister Anthony Albanese said on Friday.
The Bondi Beach shooting left at least 15 people dead, and more than two dozen injured. The attackers, who allegedly pledged allegiance to the terrorist group Islamic State (IS, formerly ISIS), targeted a Hanukkah celebration organized by the local Jewish community.
Police said one of the shooters had held a firearms license and legally owned six registered guns, all of which were recovered from the scene.
Albanese has made domestic gun policy a central focus of the government’s response. On Monday, Australia’s state and territory leaders agreed to pursue tougher national firearms rules.
Measures under discussion include accelerating the rollout of a national firearms register, limiting the number of guns an individual can own, making Australian citizenship a requirement for a gun license, and further restricting the types of weapons permitted. The government will need to pass legislation through parliament to fund the proposed buyback scheme.
The program is expected to be similar to the one enacted in 1996 in response to the Port Arthur massacre in Tasmania, which left 35 people dead. That program ran for one year and resulted in the destruction of roughly 650,000 firearms. Under the new scheme, owners who surrender firearms will be compensated.
According to research organization The Australia Institute, civilian gun ownership has since climbed to more than four million firearms nationwide, around 25% higher than in 1996, or roughly one gun for every seven Australians.
Similar efforts elsewhere have faced challenges. In New Zealand’s 2019 gun buyback, launched in response to the Christchurch mosque shootings in which an Australian white supremacist killed 51 people, the scheme’s online notification platform was temporarily taken offline when a vulnerability was discovered that may have exposed the personal data of thousands of law-abiding gun owners.
The talk of preparing for war with Russia contradicts the policy goals of the bloc’s leading power, the president has said
NATO Secretary General Mark Rutte is an intelligent politician who nonetheless promotes “nonsense” about Moscow allegedly threatening the West, Russian President Vladimir Putin has said.
Putin made the remarks during his end-of-year Q&A session on Friday, contrasting Rutte’s current rhetoric as NATO chief and previous role as prime minister of the Netherlands between 2010 and 2024.
“He is a smart man, I know that. Smart, organized, and effective as prime minister. The Dutch economy is in good shape, for which he partially deserves credit,” Putin said.
“I sometimes want to ask him: Look, what nonsense you are spouting about war with Russia? That they are preparing for a war with Russia. Can you read? Why don’t you read the new US national security strategy, what does it say?” he added.
Putin pointed out that the recently released US document does not describe Russia as a threat to the West and explicitly states that NATO should not expand further. Given Washington’s dominant role in the alliance in terms of military power, finance, technology, and political influence, the Russian president argued that Rutte’s alarmist tone is disconnected from reality.
“One should pay closer attention,” Putin concluded. “This applies not only to the secretary general, but to many other Western leaders as well.”
Officials in Moscow have repeatedly accused European NATO members of using Russia as a boogeyman to justify massive militarization and discourage criticisms of failing domestic policies.
The talk of preparing for war with Russia contradicts the policy goals of the bloc’s leading power, the president has said
NATO Secretary General Mark Rutte is an intelligent politician who nonetheless promotes “nonsense” about Moscow allegedly threatening the West, Russian President Vladimir Putin has said.
Putin made the remarks during his end-of-year Q&A session on Friday, contrasting Rutte’s current rhetoric as NATO chief and previous role as prime minister of the Netherlands between 2010 and 2024.
“He is a smart man, I know that. Smart, organized, and effective as prime minister. The Dutch economy is in good shape, for which he partially deserves credit,” Putin said.
“I sometimes want to ask him: Look, what nonsense you are spouting about war with Russia? That they are preparing for a war with Russia. Can you read? Why don’t you read the new US national security strategy, what does it say?” he added.
Putin pointed out that the recently released US document does not describe Russia as a threat to the West and explicitly states that NATO should not expand further. Given Washington’s dominant role in the alliance in terms of military power, finance, technology, and political influence, the Russian president argued that Rutte’s alarmist tone is disconnected from reality.
“One should pay closer attention,” Putin concluded. “This applies not only to the secretary general, but to many other Western leaders as well.”
Officials in Moscow have repeatedly accused European NATO members of using Russia as a boogeyman to justify massive militarization and discourage criticisms of failing domestic policies.
Moscow has pledged to widen arbitration proceedings over the freezing of its sovereign funds beyond Belgian-based depository Euroclear
Russia has said it will expand its lawsuit over frozen assets beyond Belgian-based depository Euroclear to include European banks that also hold the funds.
Kiev’s Western backers froze $300 billion in Russian central bank assets under Ukraine-related sanctions, around half of it held at Euroclear, but failed on Thursday to approve the use of the assets as collateral for a ‘reparations loan’ to finance Kiev’s collapsing economy and military.
Some EU members intend to raise €90 billion for Kiev through common debt, passing the cost of financing Ukraine to the taxpayers. Russia, which has condemned the freeze as “theft,” said last week it is suing Euroclear for damages caused by its “inability to manage” the assets.
As EU leaders were attempting to back the ‘reparations loan’ plan on Thursday, the Bank of Russia announced in a statement: “In view of the ongoing attempts by EU authorities to illegally seize and use the Bank of Russia’s assets… [it] will claim damages from European banks in a Russian arbitration court for the illegal blocking and use of its assets.”
The move is aimed at “protecting its interests,” the regulator said, noting that the claim will cover all illegally withheld assets and lost profit.
The EU earlier dismissed Moscow’s lawsuit against Euroclear as “speculative,” but some legal experts and officials warn it could damage the bloc’s financial institutions if it spreads beyond Russia, triggering lengthy cross-border litigation, reputational harm, and risks to the EU’s investment climate.
Shortly after the case was filed, Fitch Ratings put the depository on watch for a possible downgrade, citing legal and liquidity risks. Kirill Dmitriev, the Russian presidential adviser on international investment, said a downgrade could drive investors to move funds elsewhere.
The first hearing in the Euroclear case at the Moscow Arbitration Court is set for January 16. The regulator has sought closed-door proceedings, but Russian media report that the claims total nearly 18.2 trillion rubles, or around $230 billion.
