The European Union gave the first approval for a $106 billion loan to Ukraine on Wednesday, after Hungary lifted its months-long veto on the funds.
More funding will go towards it Defense sector of Ukraineofficials in Kyiv say it is central to Europe’s long-term security. The move may also indicate a more constructive relationship with the next bloc who is fired by Hungarian Prime Minister Viktor Orbán earlier this month.
The loan, launched in December, was caught up in a dispute between Hungary and Ukraine over an oil pipeline that crosses Ukrainian territory. Orbán opposed the funds in February, accusing Ukraine of shutting down the Druzhba Pipeline, which transports Russian oil from Ukraine to Hungary and Slovakia.
But on April 12, Orbán lost in Hungary’s parliamentary elections to the center-right challenger Peter Magyar, who took a pro-Ukraine stance during the campaign. Ukrainian President Volodymyr Zelenskyy says the Druzhba Pipeline has been repaired and that Russian oil flowing to Hungary and Slovakia has resumed.
The loan still needs to be formally approved by the EU after EU ambassadors gave their first go-ahead at Wednesday’s meeting, but with Hungary’s veto lifted, no tough hurdles remain.
Ukrainian officials say most of the funds will be used for military production.
“We know that almost two-thirds will be spent on our defense industry,” Yuriy Sak, an adviser to the Ministry of Industry of Ukraine, told CBS News. “Our defense industry is capable of producing weapons worth $50 billion but the government can currently only buy $15 billion.”
Funds are coming at a crucial time for the Ukrainian military, which has been making steady progress during its fifth year of war with Russia, but with limited resources at its disposal.
“The lack of those funds has been dangerous,” said Heorhii Tykhyi, a spokesman for the Ministry of Foreign Affairs of Ukraine, told CBS News. “There have been some defense projects that have already been underfunded or not implemented because of a lack of funding, so we’re very happy that this is moving forward.”
Kyiv also welcomed the loan as a sign of more constructive relations with the EU, which continues to view Ukraine as an important security partner.
“It’s money for the defense of Ukraine, but I think people now appreciate that this is for the defense of the European Union,” said Sak.
Tykhyi said: “This loan is not an act of donation. It is not an act of solidarity with Ukraine. It is money intended to protect Europe from the threat of Russia.”
Hungary, which remains heavily dependent on Russian power, could still complicate Ukraine’s relations with the bloc. But Ukrainian officials still hope for a more productive relationship with the new government in Budapest.
“Orban was a bone in our throat,” said Sak. “We’ve been getting mixed messages from Magyar so we’ll have to see how it goes, but we know he won’t be disruptive like Orban.”
Zelenskyy, speaking to reporters in Kyiv on Wednesday, was optimistic about the future of relations.
“I very much hope that Hungary’s position will build on us. We will also show steps to meet them in the middle,” he said. “We, as neighbors, must live in peace.”
