Ukraine’s €23.5bn Defence Gap

Ukraine has already used up its 2026 defence budget. President Volodymyr Zelenskyy says the hole now stands at USD 27 billion, roughly €23.5 billion (President of Ukraine, DW Ukraine). The EU has already finalised a €90 billion loan package for Kyiv, approved by the Council in April (EEAS/Council). But anyone in Malta who has dealt with EU funds, from infrastructure projects to state aid files, knows the difference between money announced and money actually in hand. That difference is now one of the war’s central financing problems.

Approved billions, delayed cash

On 24 August, the European Commission approved €6.1 billion in new defence purchases for Ukraine, covering air defence, ammunition and radars (European Commission). Total approved procurement plans now exceed €22 billion. By late July, however, only €8.35 billion had actually reached Ukraine (European Commission, Brussels Signal).

The blockage is not political theatre. It is contractual. Ukraine cannot simply draw down approved EU funds. It must first sign contracts with arms manufacturers, send those contracts to the Commission, and wait for Brussels to review them before the money is released (Brussels Signal). As a control system, it is understandable. As a wartime financing mechanism, it means approved billions can sit in a queue while soldiers wait for weapons.

The €90 billion loan is split into €60 billion for weapons procurement and €30 billion for budget support over 2026 and 2027 (EEAS/Council). The budget-support part is conditional. Kyiv must meet reform targets on rule of law and anti-corruption before each payment, and EU governments tightened those conditions in July (European Pravda, Brussels Times).

That distinction matters because Zelenskyy’s shortfall is not only about buying equipment. Around USD 20 billion is needed for military salaries and payments to the families of soldiers killed in the war. Another USD 8–10 billion is needed to pre-finance weapons orders running into early 2027 (DW Ukraine, UA News). Procurement approvals, however large, do not pay wages.

Moving 2027 money into 2026 — and why that is not enough

Zelenskyy’s proposed solution is to bring forward part of the 2027 loan allocation into this year (President of Ukraine). As of 25 August, however, Ukraine had not formally asked the Commission to do so. A Commission spokesperson said Brussels was ready to help "to the largest extent possible", but had received no official request (Kyiv Independent).

Even if the EU front-loads the money, it would only change the timing of the existing €90 billion package. Germany’s BMF Scientific Advisory Board estimated that about €45 billion could still be missing for 2026–27 even after the full EU pledge is counted (BMF Scientific Advisory Board). Berlin calculations reported by FAZ suggest Ukraine may need up to €70 billion a year for defence, while the current EU arrangement provides roughly €30 billion annually in procurement (FAZ).

Who pays, who gains

The loan also comes with rules on where weapons are produced. No more than 35% of the value can come from outside the EU, the wider European Economic Area and Ukraine, unless Brussels grants an exemption (Delfi). Nine EU defence ministers have pushed Brussels to waive the limit so Ukraine can buy American Patriot air-defence systems without delay (Euromaidan Press). France is arguing the other way, saying the loan should also strengthen Europe’s own defence industry (Euronews). European arms manufacturers benefit from that rule. Ukraine’s army carries the cost in speed.

Frozen Russian assets offer only a partial way out. The EU has transferred €8 billion in profits earned on about €210 billion in immobilised Russian central-bank assets, most of them held at Euroclear in Brussels (European Commission, Council on Foreign Relations). But profits are small next to the gap. Seizing the principal itself, an idea Sweden’s foreign minister has pushed to reopen (Euractiv), runs into Belgium’s refusal to carry alone the risk of a possible €200 billion reimbursement if a court later rules against the EU (Kyiv Independent).

The €90 billion loan is not symbolic. €11.6 billion had been disbursed by late July. But Ukraine’s wartime spending is moving faster than the EU’s payment timetable, and the remaining gap is too large to be closed by procurement approvals or frozen-asset profits. EU governments now have to decide whether to put new money on the table, or treat €90 billion as the limit of Europe’s support.