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EU readies more Russia sanctions ahead of Ukraine war anniversary

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The EU is readying more sanctions against Russia and financial support for Kyiv ahead of the second anniversary of the war, in a bid to revitalise waning levels of western assistance to Ukraine.

The package includes a 13th set of restrictions on businesses and individuals connected to the 2022 full-scale invasion of Ukraine, as well as a long-delayed agreement on €50bn for Kyiv over the next four years, some of which could be paid out as soon as a deal is struck, according to people familiar with the preparations. Another €5bn in military assistance per year and a decision to set aside profits arising from Russia’s frozen assets are also part of the overall set of support measures.

“It’s money, weapons and sanctions at a time when we recognise [the Ukrainians] need encouragement,” said one EU diplomat involved in negotiations over the package. “But two years in, there are limits to what we can do.”

Ukrainian officials have privately voiced concern about diminishing levels of western support in recent months, and the risk of economic collapse and military reversals if key allies — who are also grappling with the war in Gaza — do not provide additional aid.

EU leaders in December failed to agree on the four-year financing for Kyiv and in Washington, Congress has been unable to give a green light to US military and financial aid for this year. As a result, Ukrainian armed forces have started rationing their ammunition at a time when Russia has intensified its aerial attacks.

The new EU sanctions will be focused on adding more individuals and businesses to the asset freeze and travel ban list, according to people familiar with the discussions, and it is unlikely to include a ban on Russian aluminium imports as requested by Poland and the Baltic countries. Other elements could also be watered down to secure support, as previous attempts by some member states to target Russia’s nuclear fuel and liquefied natural gas exports to the EU have failed because of a lack of consensus.

The €50bn financial aid was proposed last year as part of an EU budget update that still needs to be signed off by leaders meeting on February 1. Hungarian prime minister Viktor Orbán blocked the deal in December and the European Commission is now open to concessions to get him on board, including giving him the possibility of reviewing the aid further down the line.

The Hungarian leader has so far maintained his opposition to using the EU budget to fund Kyiv and in the run-up to next week’s summit he has also staggered Budapest’s approval of Sweden’s Nato membership.

But EU diplomats have expressed confidence that the Hungarian leader will eventually give in, as he has done in previous situations related to Ukraine and Russia.

“If Orbán blows up the [EU budget top-up], it’s like a political exit from the union,” said a senior EU diplomat.

One additional element is the possibility of advancing some of the aid — the exact amount is still being negotiated — to Ukraine as soon as leaders and the European parliament sign off on the package.

The war-torn country urgently needs help to stay afloat, and with US support being thrown into doubt, the EU is its principal lifeline. The commission wants to ensure that Kyiv can balance its budget without resorting to printing cash, which would drive up inflation. The rest of the money will be disbursed in tranches over four years as Ukraine ticks off reforms linked to its bid to join the bloc.

The commission’s proposal on Russian state assets dates from December, but stops short of actually confiscating those profits and transferring them to Ukraine. The frozen assets proposal will “show progress without actually getting the money any closer to Kyiv”, said a senior EU diplomat involved in the negotiations. “We are kicking the can down the road.”

A separate, US-led push at the G7 level to grab the underlying assets themselves, the majority of which sit in Europe, is unlikely to get the backing of Italy, France and Germany, EU and national officials said. 

Negotiations are also continuing on overhauling the so-called European Peace Facility, a fund that has financed weapons supplies for Ukraine, people involved in the talks said.

The negotiations are focused particularly on “gradually phasing out” reimbursements to capitals for the armaments they sent to Ukraine, and replace them with payments for joint production of weapons instead. Countries with large arms industries, such as Germany, want that phase out to happen faster than those without.

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