EU funds 26 June 2023, 9:42am

Hungary could obstruct EU's ammo aid for Ukraine

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The European Union is increasingly supporting military development in its member states because of the war between Russia and Ukraine. The EU, originally set up as an economic and regulatory power, is now showing signs of military engagement and is actively supporting Kyiv in arming itself, with another €500 million in funding set to be voted on this week. However, it is the Hungarian government that says it will block aid to Ukraine as long as sanctions against OTP remain in place.

The EU's response to the war in Ukraine is centred around the European Peace Facility (EPF), which has earmarked €1 billion to reimburse member states for ammunition and missiles sent to Ukraine. A further €1 billion has been earmarked for joint purchases of ammunition by EU countries. The EPF was originally focused on Africa, but from February 2022 onwards its focus has been shifted to Ukraine.

The EU has already sent significant military assistance to Kyiv, including 220,000 rounds of ammunition and 1300 missiles in May. In addition, the European Union's military assistance mission to train 15,000 Ukrainian soldiers has been launched with €100 million of EPF funding. However, critics argue that these efforts are not enough to tip the balance of power in Ukraine. Despite the EU's increased military spending on Ukraine, skeptics say it will not deter Russian President Vladimir Putin, Politico concludes.

The EU's involvement in defence projects is limited by the fact that it was originally set up as a peace project, as its budget cannot be used for military operations. To address this, the European Commission has proposed the Act in Support of Ammunition Production (ASAP), a €500 million initiative to boost arms production. Although this approach comes close to using budgetary resources for military purposes, supporting the EU's industrial base is in principle a legitimate legal loophole.

On Monday, member states are due to discuss another €500 million in ammunition subsidies, but the Hungarian government has already promised to veto the proposal.

According to Politico, the foreign ministers are expected to agree on a €3.5 billion increase in the EPF, an extra-budgetary fund that has already provided Ukraine with some €5.6 billion in military aid. Not all of the money will go to Ukraine, but also to other destinations such as Africa. But Hungary is blocking the €500 million slice for Kyiv because the Hungarian OTP Bank is still on the list of 'war-funding' companies on the Ukrainian sanctions list.

What EU officials and the Kyiv leadership can be optimistic about, however, is that the Viktor Orbán-led cabinet previously vetoed the 11th EU sanctions package, but the government still approved it in the end, even though the support was tied to the withdrawal of OTP Bank from the Ukrainian sanctions list.

Cover photo: Getty Images.