EU leaders request reform of bloc’s weapons fund for Ukraine

EU leaders have postponed the agreement to top-up the European Peace Facility (EPF) used to reimburse member states for their donations to Ukraine, as some countries wish to change the modalities of the fund.

“The European Council invites the Council to intensify work on the reform of the European Peace Facility (EPF) and the further increase of its financing, building on the proposal of the High Representative,” according to a summit text approved by EU leaders on Thursday (14 December).

EU officials had hoped the bloc’s leaders would unlock at least a €5 billion top-up for the EPF dedicated to Ukraine, out of the €20 billion initially tabled.

Since the beginning of Russia’s war on Ukraine, the fund has been used to reimburse the EU member states for their donations of defence equipment to Ukraine.

It was originally meant to fund lethal and non-lethal equipment to third countries and the EU’s military missions and operations abroad.

Germany and France, the two biggest contributors accounting for more than 40% of the pot, are now looking into a potential reform of the intergovernmental fund, two EU officials and three diplomats told Euractiv.

In addition, EU member states were reluctant to grant the full proposed €20 billion.

The move comes on top of the EU leaders’ inability to green light a €50 billion in EU financial aid to Ukraine over Hungary’s veto, throwing into doubt Europe’s ongoing support after the bloc’s leaders side-stepped his opposition to agree to open accession talks with Kyiv.

Questions around the best use of the fund arose amid the war in Ukraine having gone on for over 600 days, with sustained requests for a large amount of military equipment and financial support from its European allies.

The fund, which is financed by the EU member states according to their GDP, has allowed the reimbursement of €5.6 billion of military donations and joint procurement but does not take into account bilateral deals.

The intergovernmental solidarity-based scheme allowed richer countries such as Germany and France to pay for smaller countries’ important donations, especially those in Central and Eastern Europe, which has enabled them to buy newer equipment.

Berlin and Paris lead

But besides the discussion on the amounts to dedicate to the fund, “there is a larger debate” on the EPF, one of the EU diplomats said, “with discussions on the modalities, the implementation and so on”.

Germany and France share very different views as regards the future of the EPF.

Berlin wants to revise the way its contribution is calculated, as Politico first reported. The system proposed, several people with knowledge of the proposal told Euractiv, would have EU member states taking into account the amounts spent on a bilateral basis and deduct those from their contribution to the European fund.

Germany was heavily criticised for this idea, one source told Euractiv, as this scheme may effectively end the solidarity on which the system is based.

France would have liked to see a ‘buy-European’ clause as part of the deal, as an instrument for a more integrated European defence union.

Paris wants to “think about the modalities, such as the place of the European defence and innovation technological base, how to encourage joint procurement, and incentivise the development of Ukraine’s defence industry”, the diplomat said.

The traditional French position, pushing for the development of the European defence industry, is therefore also in favour of an EU-preference, which makes it impossible for all types of equipment to be applied for on a short-term basis.

The EU diplomatic service (EEAS) has looked to turn the fund’s logic from incentivising the cession of defence equipment to incentivising procurement on behalf of Kyiv’s needs, which is closer to the Paris’ perspective.

The EPF is a major part of the ‘security commitments’ the EU looks to offer Kyiv as proof of long-term support, which involves money, training of armed forces and industrial cooperation, according to an initial draft memo seen by Euractiv.

[Edited by Alexandra Brzozowski/Nathalie Weatherald]

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