How the EU forged a deal to fund another €5bn in weapons for Ukraine

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Good morning. A scoop to start: Brussels plans a €7.4bn financial aid agreement with Egypt to be unveiled this weekend, officials tell us, in an effort to shore up the country’s economy in the face of regional turmoil.

Today, I explain the compromise deal on fresh EU military funding for Ukraine, while our trade correspondent reports on Brussels’ expedition to Greenland in search of precious metals.

Try European

EU member states are set to endorse a fresh €5bn in joint funding for military supplies to Ukraine today after carving out a hard-fought compromise that allows the cash to be spent on non-European weapons — if local options fall short.

Context: The European Peace Facility, funded by EU states outside of the shared bloc budget, has been a critical element of Ukraine’s military supplies since February 2022. It incentivises shipments by partially reimbursing capitals for what they provide to Kyiv. But it has been depleted and desperately needs a top-up.

France, with support from Greece and Cyprus, was pushing for the fund to only reimburse shipments of European-manufactured arms. Paris said this would help Ukraine while advancing the long-term strategic goal of boosting Europe’s domestic defence industry; something on which all capitals agree.

Others wanted full flexibility, in the name of helping Ukraine as fast as possible, to buy weapons from third countries if they were readily available.

The deal set to be agreed today finds a healthy compromise. Reimbursable shipments “should give priority to the European defence industry (and Norway), while exceptionally allowing for flexibility in cases where it cannot provide within a timeframe compatible with Ukrainian needs,” says the proposed text.

This flexibility (which some countries intend to be more of a rule than an exception) will “continue to be eligible until a date to be determined”, the text adds, deftly kicking the can down the road.

“Everyone can go home happy, to be honest,” said one diplomat involved in the negotiations. “In the medium term it foresees a shift to buy European, but leaves a backdoor in case we need it.”

The debate, which has dragged on for months and would have gatecrashed a summit of EU leaders next week if not for a deal among their diplomats, comes at a critical time for Ukraine.

With US funding slowed to a trickle and Russia’s military acceleration giving it vastly superior supplies of materiel, the country is relying heavily on Europe to keep it armed with enough to, at the very least, hold back a renewed invasion.

Chart du jour: Manpower

When Russia launched its full-scale invasion in 2022, many Ukrainians volunteered to defend their country. But that pool has been exhausted and a large proportion of the men of fighting age are unwilling to be deployed to the front. A new mobilisation law could mean up to 500,000 are drafted.

Northern delights

Ursula von der Leyen is heading towards the Arctic Circle on Friday to open a European Commission office in Nuuk, capital of Greenland, writes Andy Bounds.

Context: The Danish territory is at the centre of a tussle for influence as the ice melts. China is interested in its raw materials, the US has an air base in the far north and Russia is increasingly using the Arctic as a shipping route.

Now Brussels is planting its flag, some three years after it first announced plans to do so, joining a small US mission in the capital. Von der Leyen will be accompanied by Mette Frederiksen, the Danish prime minister who told the FT last month that Europe had been too naive in becoming dependent on Russian energy imports and Chinese goods.

Greenland has plentiful oil and gas reserves as well as the rare earths needed for green technology, over which China has a dominant position in the global supply chain.

However, diplomats note that excitement over the finds has cooled. Greenland is a long way from anywhere that might use the resources, and the costs of transport are prohibitive.

Still, the EU is sending a signal that it cares about the strategically located territory. “We have to show our presence and counter Chinese influence,” said one official, adding that it was a bad look that more US government officials were there than EU. Three or four people will be posted in the future representation.

A second commission official said the three-year delay was not out of the ordinary. “Opening an office requires discussions with our counterparts and careful preparations. That takes time.

“Now the preparatory steps are done, so we are ready to cut the ribbon.”

What to watch today

1. European parliament to vote on AI Act.

2. German Chancellor Olaf Scholz receives Thailand’s Prime Minister Srettha Thavisin in Berlin.

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