(1)

An association agreement between the Union and Ukraine (2), including a Deep and Comprehensive Free Trade Area, entered into force on 1 September 2017.

(2)

In 2014, Ukraine embarked on an ambitious reform programme with the aim of stabilising its economy and improving the livelihoods of its citizens. The fight against corruption, as well as constitutional, electoral and judicial reforms, are among the top priorities on the agenda. The implementation of those reforms was supported by consecutive macro-financial assistance programmes, under which Ukraine has received assistance from the Union in the form of loans for a total of EUR 6,6 billion.

(3)

The emergency macro-financial assistance, which was made available in the context of mounting threat, right before the Russian invasion, pursuant to Decision (EU) 2022/313 of the European Parliament and of the Council (3), provided EUR 1,2 billion in loans to Ukraine, disbursed in two instalments, each of EUR 600 million, in March and May 2022.

(4)

The Union’s exceptional macro-financial assistance of up to EUR 1 billion, made available pursuant to Decision (EU) 2022/1201 of the European Parliament and of the Council (4), provided swift and urgent support to the Ukrainian budget and was fully disbursed in two tranches on 1 and 2 August 2022. That assistance constituted the first stage of the planned exceptional macro-financial assistance to Ukraine of up to EUR 9 billion, announced by the Commission in its communication of 18 May 2022 entitled ‘Ukraine Relief and Reconstruction’ and endorsed by the European Council of 23-24 June 2022.

(5)

Decision (EU) 2022/1628 of the European Parliament and of the Council (5) constituted a further step in the implementation of the Union’s planned exceptional macro-financial assistance. It established the basis for providing to Ukraine a further amount of up to EUR 5 billion in the form of loans on highly concessional terms, of which EUR 2 billion was disbursed on 18 October, with the remaining EUR 3 billion to be disbursed by the end of 2022.

(6)

Russia’s unprovoked and unjustified war of aggression against Ukraine since 24 February 2022 has caused Ukraine a loss of access to financial markets and a significant drop in public revenue, while public expenditure to address the humanitarian situation and to maintain the continuity of State services has increased markedly. In that very uncertain and volatile situation, the best estimates of Ukraine’s funding needs by the International Monetary Fund (IMF) in the summer of 2022 pointed to an extraordinary funding gap of around USD 39 billion in 2022, of which around half could be met thanks to international assistance. The swift provision by the Union of the macro-financial assistance to Ukraine under Decision (EU) 2022/1628 was, given the extraordinary circumstances, considered to be an appropriate short-term response to the sizeable risks to Ukraine’s macro-financial stability. The further amount of up to EUR 5 billion of exceptional macro-financial assistance under that Decision was to support Ukraine’s macro-financial stabilisation, strengthen the immediate resilience of the country and sustain its capacity towards recovery, thereby contributing to the public debt sustainability of Ukraine and its ability to ultimately be in a position to meet its financial obligations.

(7)

Since the beginning of Russia’s war of aggression against Ukraine, the Union, its Member States and European financial institutions have mobilised EUR 19,7 billion for Ukraine’s economic, social and financial resilience. That amount combines support from the Union budget, in the amount of EUR 12,4 billion, including the exceptional macro-financial assistance and support from the European Investment Bank and the European Bank for Reconstruction and Development, fully or partially guaranteed by the Union budget, as well as further financial support by Member States, in the amount of EUR 7,3 billion.

(8)

In addition, the Council decided on assistance measures to support the Ukrainian armed forces under the European Peace Facility, in the amount of EUR 3,1 billion under Council Decision (CFSP) 2021/509 (6), and a military assistance mission in support of Ukraine with EUR 0,1 billion for the common costs under Council Decision (CFSP) 2022/1968 (7). The Union and its Member States have also delivered unprecedented in-kind emergency response via the Union Civil Protection Mechanism under Regulation (EU) 2021/836 of the European Parliament and of the Council (8), constituting the largest emergency operation since the creation of that mechanism, and channelling millions of emergency items to Ukraine and the region.

(9)

The European Council of 23 June 2022 decided to grant the status of candidate country to Ukraine. Ongoing strong support to Ukraine is a key priority for the Union. As the damage from Russia’s war of aggression to the Ukrainian economy, citizens and businesses is tremendous, ongoing strong support to Ukraine requires an organised collective approach as set out in the instrument for providing Union support to Ukraine (macro-financial assistance +) established by this Regulation (the ‘Instrument’).

(10)

Russia’s war of aggression against Ukraine represents a strategic geopolitical threat to the Union as a whole and requires Member States to stand strong and united. It is therefore essential that Union support be deployed rapidly and be able to adapt flexibly and gradually for immediate relief and short-term rehabilitation on the way to future reconstruction.

(11)

The general objective of the Instrument is to contribute to closing the funding gap of Ukraine in 2023, notably by providing highly concessional short-term financial relief to Ukraine’s State budget in a predictable, continuous, orderly and timely manner, including financing the rehabilitation and initial support towards post-war reconstruction, where appropriate, with a view to supporting Ukraine on its path towards European integration.

(12)

To attain the Instrument’s general objective, the assistance should be provided to support macro-financial stability in Ukraine, and to ease Ukraine’s external financing constraints. The Commission should implement the support under the Instrument in accordance with the key principles and objectives of the measures taken within the different areas of external action and other relevant Union policies.

(13)

The provision of rehabilitation support, repair, and maintenance of critical functions and infrastructure as well as relief for people in need and for most affected areas in terms of material and social support, temporary housing, residential and infrastructural construction should also count among the main areas of support under the Instrument.

(14)

The Instrument should also support the strengthening of the capacity of Ukrainian authorities to prepare for the future post-war reconstruction and for the early preparatory phase of the pre-accession process, as appropriate, including the strengthening of Ukraine’s institutions, reforming and reinforcing the effectiveness of public administration as well as transparency, structural reforms and good governance at all levels.

(15)

The Instrument will support the Union’s external policy towards Ukraine. The Commission and the European External Action Service should work closely together throughout the support operation in order to coordinate, and ensure the consistency of, the Union’s external policy. The support to Ukraine under the Instrument will continue to contribute significantly to satisfying Ukraine’s funding needs as estimated by the IMF, the World Bank and other international financial institutions, taking into account Ukraine’s capacity to finance itself with its own resources. The determination of the amount of the support also takes into account the expected financial contributions from bilateral and multilateral donors, as well as the pre-existing deployment of the Union’s other external financing instruments in Ukraine and the added value of the overall Union involvement.

(16)

The situation of Ukraine requires a step-by-step approach whereby an instrument focusing on macro-financial stability as well as immediate relief and rehabilitation should be accompanied by continuous support under the Neighbourhood, Development and International Cooperation Instrument – Global Europe established by Regulation (EU) 2021/947 of the European Parliament and of the Council (9) and the humanitarian aid operations under Council Regulation (EC) No 1257/96 (10).

(17)

This Regulation should lay down the resources available for the Instrument for the period from 1 January 2023 to 31 December 2023 with possible disbursements until 31 March 2024. A maximum amount of EUR 18 billion should be made available in the form of loans. In addition, for the period from 1 January 2023 to 31 December 2027, this Regulation should provide for an interest rate subsidy. To ensure coverage of interest costs during the lifetime of the loans, contributions from the Member States beyond 2027 should be renewed and continue as external assigned revenue unless covered through other means in future multiannual financial frameworks. Therefore it might be possible to extend the contributions from the Member States beyond 2027.

(18)

This Regulation should provide the possibility for the Member States to make available additional resources, as external assigned revenue, to be implemented under the memorandum of understanding (MoU) of the Instrument. Such a possibility for additional contribution should also be made for interested third countries and parties as external assigned revenues, in accordance with Article 21(2), points (d) and (e), of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (11) (the ‘Financial Regulation’). To foster synergies and complementarities, it is appropriate to allow that such additional contributions from the Member States, from interested third countries and parties could also be made available to the programmes established under Regulations (EU) 2021/947 and (EC) No 1257/96 to finance measures contributing to the objectives of the Instrument.

(19)

Voluntary contributions by the Member States should be irrevocable, unconditional and on demand. For that purpose, the Member States should enter into a contribution agreement within the meaning of Article 22(2) of the Financial Regulation with the Commission. Such contribution agreement should cover the contribution to the interest rate subsidy and, should the Member States wish to provide them, also additional amounts.

(20)

The support under the Instrument should be made available under the precondition that Ukraine continue to respect effective democratic mechanisms and its institutions, including a multi-party parliamentary system, and the rule of law, and to guarantee respect for human rights.

(21)

The support under the Instrument should be linked to policy conditions to be set out in a MoU. Those conditions should also include commitments to strengthen the country’s economic performance and resilience, the business environment, facilitate critical reconstruction and address challenges in the energy sector.

(22)

The policy conditions should be complemented by stringent reporting requirements, aiming to ensure that the funds are used in an efficient, transparent and accountable manner.

(23)

In view of the situation in Ukraine, it is appropriate to provide for a mid-term review of the MoU.

(24)

The support under the Instrument should be released subject to the respect of preconditions, satisfactory implementation and progress towards the implementation of the policy conditions.

(25)

It is appropriate to provide for the possibility to reassess the funding needs of Ukraine and to reduce, suspend or cancel the support if those needs decrease fundamentally during the period of the disbursement of the support under the Instrument compared to the initial projections. It is also appropriate to provide for the possibility to suspend or cancel the disbursements in case the requirements for the release of the support under the Instrument are not fulfilled.

(26)

In the context of Ukraine’s urgent financing needs, it is appropriate to organise the financial assistance under the diversified funding strategy provided for in Article 220a of the Financial Regulation and established as a single funding method therein, which is expected to enhance the liquidity of Union bonds and the attractiveness and cost-effectiveness of Union issuance.

(27)

Given the difficult situation of Ukraine caused by Russia’s war of aggression and to support Ukraine on its long-term stability path, it is appropriate to provide loans to Ukraine on highly concessional terms with a maximum duration of 35 years and to not start the repayment of the principal before 2033. It is also appropriate to derogate from Article 220(5), point (e), of the Financial Regulation and to allow the Union the possibility to cover the interest rate costs and to waive the administrative costs that would otherwise be borne by Ukraine. The interest rate subsidy should be granted as an instrument deemed appropriate to ensure the effectiveness of the support under the Instrument within the meaning of Article 220(1) of the Financial Regulation. It should be financed from additional voluntary contributions by the Member States and should become available gradually as the agreements with the Member States enter into force.

(28)

It should be possible for Ukraine to request the interest rate subsidy and the waiver of administrative costs each year.

(29)

The financial liability from loans under this Regulation should not be supported by the External Action Guarantee, by derogation from Article 31(3), second sentence, of Regulation (EU) 2021/947. Support under the Instrument should constitute financial assistance within the meaning of Article 220(1) of the Financial Regulation. In considering the financial risks and the budgetary coverage, no provisioning should be constituted for the financial assistance in the form of loans under the Instrument and, by derogation from Article 211(1) of the Financial Regulation, no provisioning rate as a percentage of the amount referred to in Article 4(1) of this Regulation should be set.

(30)

Council Regulation (EU, Euratom) 2020/2093 (12) currently does not allow for coverage of the financial liability arising from loans under the Instrument. Pending its possible amendment, which would allow, as a guarantee, the mobilisation of budgetary resources over and above the multiannual financial framework (MFF) ceilings and up to the limits of the ceilings referred to in Article 3(1) and (2) of Council Decision (EU, Euratom) 2020/2053 (13), it is appropriate to seek an alternative solution providing additional resources.

(31)

Voluntary contributions by Member States in the form of guarantees have been identified as an appropriate tool to provide the protection allowing the borrowing and lending operations under this Regulation. The Member States’ guarantees should constitute an appropriate safeguard ensuring the Union’s ability to repay the borrowings supporting the loans under the Instrument.

(32)

The guarantees provided by Member States should cover the support under the Instrument in the form of loans of up to EUR 18 000 000 000. It is important that Member States complete the applicable national procedures to provide the guarantees as a matter of the utmost priority. Given the urgency of the situation, the time needed for the completion of those procedures should not delay the disbursement of the required financial support to Ukraine in the form of loans under this Regulation. At the same time, the financial support under the Instrument in the form of loans should be made available progressively, as the guarantees provided by Member States enter into force. In view of the principle of sound financial management and prudence, the Commission should arrange the loans taking due consideration of its credit standing. However, the support should become available for the full amount of up to EUR 18 000 000 000 as of the date of application of an amendment to Regulation (EU, Euratom) 2020/2093, or its successor, which provides for a guarantee of the loans under the Instrument under the Union budget over and above the MFF ceilings and up to the limits of the ceilings referred to in Article 3(1) and (2) of Decision (EU, Euratom) 2020/2053.

(33)

The Member States’ guarantees should be irrevocable, unconditional and on demand. Those guarantees should ensure the Union’s ability to repay the funds borrowed on the capital markets or from financial institutions. The guarantees should cease to be callable as of the date of application of an amendment to Regulation (EU, Euratom) 2020/2093, or its successor, which provides for a guarantee of the loans under the Instrument under the Union budget over and above the MFF ceilings and up to the limits of the ceilings referred to in Article 3(1) and (2) of Decision (EU, Euratom) 2020/2053. The guarantees should be called in the event that the Union does not receive a timely payment from Ukraine in respect of the loans under the Instrument, including, in particular, in cases of changes to the payment schedule for any reason whatsoever as well as expected and unexpected non-payments.

(34)

Amounts recovered under the loan agreements in respect of the loans under the Instrument should be reimbursed to the Member States that have honoured the guarantee calls, by derogation from Article 211(4), point (c), of the Financial Regulation.

(35)

Before calling on the guarantees provided by the Member States, the Commission, at its sole discretion and responsibility as the Union institution entrusted with the implementation of the general budget of the Union in accordance with Article 317 of the Treaty on the Functioning of the European Union, should examine all measures available under the diversified funding strategy provided for in Article 220a of the Financial Regulation, in accordance with the limits set out in this Regulation. In the relevant call on guarantees, the Commission should inform the Member States about the examination, as appropriate.

(36)

The relative share of the contributions of each Member State (contribution key) to the overall guaranteed amount should correspond to the relative shares of Member States in the total gross national income (GNI) of the Union. The calls on the guarantees should be made pro rata, applying the contribution key. Until all the guarantee agreements between the Commission and the Member States enter into force, the contribution key should be proportionately adjusted on a temporary basis.

(37)

It is appropriate that the Commission and Ukraine conclude a loan agreement for the loan support, within the framework of the conditions set out in the MoU. In order to ensure that the Union’s financial interests linked to the support under the Instrument are protected efficiently, Ukraine should take appropriate measures regarding the prevention of and fight against fraud, corruption and any other irregularities linked to that support. In addition, provision should be made in the loan agreement and in the financing agreement for the Commission to carry out checks, for the Court of Auditors to carry out audits and for the European Public Prosecutor’s Office to exercise its competences, in accordance with Articles 129 and 220 of the Financial Regulation.

(38)

Since the objective of this Regulation, namely to contribute to closing the funding gap of Ukraine in 2023, notably by providing highly concessional short-term relief to Ukraine’s State budget in a predictable, continuous, orderly and timely manner, cannot be sufficiently achieved by the Member States but can rather, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

(39)

In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council (14).

(40)

In view of the urgency entailed by the exceptional circumstances caused by Russia’s unprovoked and unjustified war of aggression, it is considered to be appropriate to invoke the exception to the eight-week period provided for in Article 4 of Protocol No 1 on the role of national Parliaments in the European Union, annexed to the Treaty on European Union, to the Treaty on the Functioning of the European Union and to the Treaty establishing the European Atomic Energy Community.

(41)

In light of the situation in Ukraine, this Regulation should enter into force as a matter of urgency on the day following that of its publication in the Official Journal of the European Union,