Hungary Drops Opposition on New EU Weapons Fund for Ukraine

(Bloomberg) — Hungary will drop its objections to the creation of a €5 billion ($5.4 billion) Ukraine military assistance fund, paving the way for an agreement to revamp a vehicle that aims to steady supply of weapons to Kyiv, once member states sort out technical issues.

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HT Image

Budapest said it won’t stand in the way of a consensus at a meeting of European Union ambassadors on Wednesday, where a deal on a larger €50 billion financial aid package remains stuck, according to people familiar with the matter.

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Setting up the new facility has gained urgency as the EU is falling short of a pledge to provide Ukraine with one million artillery shells by March and critical US funding remains blocked in Congress. Russia, meanwhile, is outproducing the West and has received about one million shells from North Korea.

The decision would mark a reversal from earlier this week, when Hungary said it opposed revamping the EU’s current facility that reimburses member states for weapons they send to Ukraine. It coincides with growing pressure on Prime Minister Viktor Orban to approve Sweden’s accession to NATO. Hungary is the last hold-out after Turkey backed the Nordic nation’s bid earlier this week.

Read more: EU Proposes Revamp of $5 Billion Ukraine Military Aid Fund

Last month, Budapest vetoed a separate €50 billion economic support package, forcing the bloc’s leaders to reconvene a week from now in Brussels to either forge a compromise with Hungary or to circumvent it. A potential agreement hinges on the terms of agreeing to Hungary’s demand for a yearly review of the aid deal. Orban insists on the right to veto annually, something the vast majority of member states reject.

The proposed assistance fund would fix reimbursement rates and shift from using existing stocks of weapons to sourcing new ones through joint procurement contracts. The bloc’s foreign policy arm presented a proposal last week to revamp the current fund, known as the European Peace Facility, Bloomberg reported previously. 

Hungary is also blocking the disbursement of the latest, €500 million tranche from the EPF. Foreign Minister Peter Szijjarto said his country may consider supporting the release of the funds after a meeting with his Ukrainian counterpart, scheduled for Monday.

Several differences between member states remain on the new military fund. Some countries want the fund to be more flexible to buy non-EU weapons, while others want its transition away from stockpiles to be more gradual.

There is also a debate on next steps. Several member states want EU leaders to endorse the plans when they meet on Feb. 1, while others want to iron out all technical details first. Ambassadors are set to discuss the issue again next week.

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