EU defuses Hungarian weapon of veto over war

The EU helps Ukraine supply arms through an off-budget, intergovernmental fund, the European Peace Facility, which reimburses countries that export arms to Ukraine. So far, €3.6 billion in military aid has been disbursed to Ukraine under the instrument, and member states decided last December to increase funding by €2 billion by 2023.

So far, spending needs have been loosely defined, but the EU is now placing a strong emphasis on artillery ammunition - as these supplies are most needed in the eastern part of the Ukrainian front, for example around Bakhmut. For this reason, Josep Borrell, the European Union's High Representative for Foreign Affairs and Security Policy, has proposed an "exceptional support package" of €1 billion for member states, focusing mainly on the provision of ammunition, according to an EU document obtained by Politico and prepared by the bloc's diplomatic service, the European Commission and the European Defence Agency.

Most importantly, they have found a way to transfer money for 155 mm ammunition through the European Peace Facility without the consent of Member States opposed to the arms transfers. This is important because of two countries in particular:

neutral Austria and Hungary, which bans arms transfers, have repeatedly objected to EU transfers.

In December last year, the Hungarian government first vetoed financial aid to Ukraine, which would have been jointly provided by the Member States. Instead, it proposed a model based on bilateral agreements instead of a single EU grant. Although the cabinet led by Viktor Orbán denied that they had vetoed it, they did not vote for the joint borrowing support until Hungary had received concessions on the introduction of a global minimum tax and the green light in the agreement on the recovery fund.

Now, however, the EU is to take the edge off Hungary's veto: it is offering a "voluntary financial contribution" to the €2 billion Peace Facility through enhanced cooperation. Thus, neither the Orbán government nor the Austrian side would need to agree if they did not want to transfer money to the fund. It stresses that the specific legal constraints of each country will be "taken into consideration" and also mentions the "possibility of constructive abstention from lethal assistance measures".

What may make it attractive, however, is that it could be a good deal for the Hungarian defence industry: the EU document also envisages a boost to European industrial production, which is trying to produce ammunition at the pace required by the war. Nor will own stocks be given up for free:

the proposal mentions “a favourable reimbursement rate, for instance up to 90% … given the extreme urgency and the depletion of Member States’ stocks.”.

Such a high rate may serve to reassure member states providing significant military assistance. When the reimbursement rate fell below 50% last year, it caused concern for some EU countries, particularly Poland, one of the EU's biggest arms donors to Ukraine.

Commonly purchased weapons

As for joint procurement - the EU countries joining forces to buy weapons - the European Defence Agency, together with the member states, would apply a new system “encompassing seven categories from small arms calibres up to 155mm.”

This project would be “launched for a duration of seven years” and so far 25 EU member states and Norway have already confirmed their willingness to participate, according to the document.

Although Politico does not name the countries involved, the two EU member states likely to be left out are Hungary and Austria.

The countries in the agreement, on the other hand, say that the procurement of 155 mm ammunition in particular should be accelerated "through a fast-track procedure for direct negotiations" with several suppliers. This type of ammunition is in particularly high demand as Ukrainian forces use it in long-range precision artillery operations.

In view of the urgency, the Project Arrangement needs to be signed no later than March,

the document reads, stating that contracts must therefore be concluded in advance between the end of April and the end of May. The speedy procedure makes it particularly important that a veto by a member state does not prevent the funds from being released.

The proposal also suggests that increased support is needed to ramp up production, as European arms factories are already operating at near full capacity and prices are already spiralling.

Concrete measures could include “identifying and helping to remove production bottlenecks in the EU” as well as “facilitating the collaboration of relevant companies in a joint industry effort to ensure availability and supply.”

The document will be discussed by defense ministers at an informal meeting in Stockholm next week and is then expected to be formally agreed by foreign and defense ministers on March 20. Leaders are also expected to give their final blessing at a meeting on March 23 and 24.

Cover photo: European Union