UK to lend Ukraine an additional £2.26bn for weapons to fight Russia

Ukraine is set to receive an additional £2.26 billion from the UK as part of a broader $50 billion loan program, which is anticipated to be confirmed by G7 members later this week. This funding will enable Kyiv to purchase weapons to bolster its defenses against the ongoing Russian invasion, according to Dan Sabbagh, the Defence and Security Editor.

The loans will be financed through the interest accrued from the $300 billion in frozen Russian assets held in Western nations. This announcement comes as the U.S. approaches a presidential election, where support for Ukraine has become a contentious topic. Rachel Reeves, the Chancellor, emphasized that the profits from these assets will not be available for Russia’s future use. “They’re now being used to fund Ukraine,” she stated during the announcement, which was made alongside Defence Secretary John Healey.

Currently, the UK has committed to providing £3 billion annually in military aid to Ukraine. The newly announced loan would be in addition to this aid and is likely to be allocated for urgently needed munitions once enabling legislation passes through Parliament, Healey noted.

However, attempts to transfer all frozen Russian assets to Ukraine have faced hurdles due to concerns from the IMF about potential impacts on financial system confidence and fears of legal challenges from Moscow. Reeves clarified, “What we’re not doing is confiscating these assets to fund this loan. We’re using the extraordinary profits on the assets, and that’s how we’re confident that we can do this within all the right legal frameworks.”

The U.S. is projected to contribute $20 billion, with other G7 members finalizing their commitments. Reeves explained that the timing of the UK’s announcement was strategically aligned with the upcoming IMF and World Bank annual meetings in Washington, D.C., and just two weeks before the U.S. presidential election. “We hope the other parts of the jigsaw fall into place at the end of this week,” she added.

With Donald Trump, the Republican presidential candidate, expressing skepticism about continuing financial support for Ukraine, questions arise regarding Ukraine’s future ability to sustain its military efforts, especially given that the U.S. has been its largest donor. Since Russia’s full-scale invasion began in February 2022, Washington has committed $64 billion in military aid.

Some of the $50 billion in loans could potentially be used to acquire U.S.-made weapons, a scenario that foreign diplomats see as a viable solution should Trump decide to halt aid from U.S. stockpiles. Nevertheless, decisions on fund allocation will ultimately rest with Ukraine, in consultation with each G7 nation providing a loan.

When asked about the upcoming budget, which will be the first under the Labour government, Reeves refrained from commenting on a timetable for increasing defense spending to 2.5% of GDP from the current 2.32%. “We stand by that commitment, and we’ll set out the details of that as soon as we can,” she said.

In the budget, the Chancellor is aiming for £40 billion in tax increases and spending cuts. Relations between the Treasury and the Ministry of Defence remain amicable, with Healey not among the ministers who have expressed concerns to Reeves about the level of cuts sought by his department.