The west wavers on Ukraine

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Ukraine’s president Volodymyr Zelenskyy was blunt when he addressed G7 leaders this week.

“Russia hopes only for one thing: that next year the free world’s consolidation will collapse. Russia believes that America and Europe will show weakness, and will not maintain support for Ukraine,” he said in a video call on Wednesday evening with his most important political allies.

“The free world vitally needs to . . . maintain support for those whose freedom is being attacked,” he said. “Ukraine has strength. And I ask you to be as strong as you can be.”

Zelenskyy’s plea is not mere rhetoric. Hours after he spoke, the US Senate rejected the White House’s latest bid to pass legislation authorising $60bn in financial support for Ukraine. Across the Atlantic, a European Commission proposal that would provide €50bn to prop up Kyiv’s budget for the next four years hangs in the balance ahead of a summit of EU leaders next week, following months of bickering between member states over how to fund it. 

Without one of those finance packages being approved, Ukraine’s long-term financial security would be in question. With neither, its future would be grim.

At a moment when Ukraine is desperate for long-term financial and military commitments as a bulwark against prolonged Russian aggression, its two most important backers have been found wanting, raising doubts over the west’s resolve.

“We need to provide clarity for Ukraine financing for the next year and coming years . . . the matter is definitely urgent,” Valdis Dombrovskis, European Commission executive vice-president, tells the FT. “Russia is already a war economy,” he said, warning that the EU must not “lose focus on support for Ukraine.”

In the EU’s case, it is not only financial support that is at risk. The bloc was supposed to act as the anchor for Ukraine’s western integration with the prospect, eventually, of Ukrainian membership. An EU agreement to start accession negotiations would give Kyiv a much-needed political victory over Moscow after a year of military disappointments — but Hungary has vowed to block it.

Volodymyr Zelenskyy at a video conference with G7 leaders, in Kyiv this week. Hours after he spoke, the US Senate rejected the White House’s latest bid to pass legislation authorising $60bn in financial support © Ukrainian Presidential Press Service/Handout/Reuters

Most unsettling for Kyiv is that support for Ukraine, once a matter of broad cross-party consensus, has become a political bargaining chip on both sides of the Atlantic.

“Ukraine is no longer special. It is no longer regarded as this issue of national security, of paramount importance for the EU, Nato, or the United States. Because if that was the case, people wouldn’t be playing politics with it,” says Jacob Kirkegaard, senior fellow at the German Marshall Fund in Brussels.

“It is a devaluation of the Ukrainian war effort. There is no other way to put it, in my opinion. And that, for Ukraine, is a terrible situation,” Kirkegaard adds. “If you’re Vladimir Putin, you’re saying, well, my strategic decision to try to hold on longer than the west is working.”

Relentless pressure

The financial pressures facing Ukraine are immense — and relentless. The government uses all of its tax revenues to cover defence spending — amounting to about half of its public expenditure. While Ukraine has received nearly $100bn worth of weapons and military training, it also needs foreign aid to pay for the government, public services, pensions and benefits. This requires $41bn in external financing next year, according to the budget passed by parliament last month. 

It was counting on $18bn from the EU, $8.5bn from the US, $5.4bn from the IMF, $1.5bn from other development banks and $1bn from the UK. Kyiv is still negotiating with other partners, such as Japan and Canada.

Although some of the required money will be paid whatever happens in Washington or Brussels, Kyiv needs cash to start flowing next month. If it fails to come through and Kyiv cannot borrow enough domestically, it may have to resort to monetary financing by the central bank, which could unleash hyperinflation and put financial stability at risk.

Hence its alarm at the impasse in the EU and US. In Brussels, Hungary has vowed to block all support lines in part as leverage to force the EU to release cash payments to Budapest frozen due to rule of law violations. 

Ukrainian servicemen operate near the frontline city of Bakhmut, eastern Ukraine, this week © Maria Senovilla/EPA-EFE/Shutterstock

At the same time, a decision by the European Commission to bundle cash for Ukraine with funding requests prioritised by some member states has backfired. Other members want those requests scaled back, and while the horse-trading continues, Ukraine is left in the middle.

In Washington, waning public support as the Ukraine war has dragged on, the lack of battlefield success and the Democrats’ loss of control of the House of Representatives following the midterm elections have together produced a political stalemate.

Multiple budgetary requests and public appeals to Congress by President Joe Biden to pass a $60bn funding package for Kyiv have gone unheeded as the Republicans and Democrats squabble over what else deserves funding.

In recent weeks, Republicans have demanded that further Ukraine aid is paired with draconian new immigration curbs at the southern border, which many Democrats would never accept.

US House Speaker Mike Johnson, centre, with Ukraine defence minister Rustem Umerov (from right), Andriy Yermak, Zelenskyy’s chief of staff, and Ukraine’s Speaker of parliament Ruslan Stefanchuk this week in Washington © Polaris/eyevine

Under the heavy influence of former president Donald Trump, both Kevin McCarthy, the House speaker for most of the year, and Mike Johnson, who replaced him after his ousting in October, have declined to put a bill to fund Ukraine up for a vote in the lower chamber.

With cash for Ukraine running out, White House officials have grown increasingly concerned and frustrated. Biden’s tone has become notably bleaker: if Ukraine was abandoned and Russia prevailed, Putin could go on to attack a Nato ally and draw the US into war, he said this week.

“We’ll have something that we don’t seek and that we don’t have today: American troops fighting Russian troops.”

“Normally, American foreign policy and funding to advance and support America’s foreign policy interests have been separated from domestic political and policy fights,” says Max Bergmann, director of the Europe, Russia, and Eurasia Program at the Center for Strategic and International Studies. “But not in this case”.

The US accounts for just under half of the nearly $100bn in military aid provided to Ukraine since February last year, but it has been able to draw on its large inventories of advanced weaponry and its bigger defence industry to arm Ukraine, a role that Kyiv’s European allies cannot take over any time soon. Ukraine is ramping up its own weapons production but from a low base.

Speaking in Washington this week, Andriy Yermak, the head of Zelenskyy’s office, appealed for 155mm artillery ammunition and air defence systems which will be critical to fending off Russian attacks over the next 12 months.

St Andrew’s Church in Kyiv. Western aid to Ukraine hit a record low in the autumn, according to data compiled by the Kiel Institute © Felipe Dana/AP

But the Pentagon has already started to ration US funding for Ukraine, which is expected to run out by the end of the month. 

“We’ve gone to the bare bones of what we can provide . . . there’s no money,” says Bergmann.

Overall, western aid to Ukraine hit a record low in the autumn, according to data compiled by the Kiel Institute. The value of fresh pledges between August and October was 87 per cent lower than the same period in 2022, while just 20 states of the 42 tracked by Keil committed new aid packages in the past three months — the lowest share since the start of Putin’s full-scale invasion.

Crunch point

The next seven days could be critical for Ukraine’s future. On Sunday, the IMF is expected to release its latest update on the country, shedding light on its fiscal position and its potential funding needs.

That, some hope, will provide a stark reminder of the stakes to officials on both sides of the Atlantic and catalyse a fresh push for deals.

EU diplomats will be locked in talks all day Sunday and throughout next week in a bid to strike a deal on a financial package. White House officials and senior Democrats are still holding out hope for a deal on Ukraine funding, but their fears and warnings about the impact of a possible lapse have grown increasingly strident. They are not just worried about the immediate impact on Ukraine, but about what the failure to aid Kyiv will tell the world about US leadership. 

“We know from intelligence community assessments that Putin believes Ukraine will fall within just months without renewed US support,” Mark Warner, the chair of the Senate intelligence committee, said this week. “Why, at this moment in time, would we prove Putin right?”

“We cannot allow dysfunction in the halls of Congress to prevent the United States from fulfilling our moral obligation to fund Ukraine,” Michael Bennet, a Colorado Democratic senator, told the FT in an emailed statement. “If we can’t get our act together, it will send a horrible message to Putin,” he added. 

EU trade commissioner Valdis Dombrovskis (L) talks with EU economy commissioner Paolo Gentiloni (C) and the Spanish economy minister Nadia Calviño (R) before the start of an EU finance ministers meeting in Brussels last month © Thierry Monasse/Getty Images

Iuliia Osmolovska, a former Ukrainian diplomat now head of the Globsec think-tank in Kyiv, says the roadblocks to continued EU and US aid are bad news for Ukraine, but not a cause for “despair”. 

The factors critical to Ukraine’s success have shifted since last year, according to a new report by her and other Ukrainian experts published this week.

Assuming an attritional conflict stretching into 2025 and beyond, direct western military support would be important alongside Ukraine’s capacity to sustain its own military machine. But the next phase of the war will be determined by Ukraine’s ability to achieve technological superiority over Russian forces through more sophisticated electronic warfare and drone capabilities.

“The main task right now is not to dive into despair, but rather to consider what we can do to actually change the situation within these limits that we have,” Osmolovska says.

But as Ukraine heads into a second successive winter with Russia set to use a large missile stockpile to target its critical power and heating infrastructure, a failure by the west to keep financial lifelines running would represent a heavy blow to morale.

“This is crunch time . . . an unfortunate aligning of the fiscal stars,” says Kirkegaard.

“All the times that western policymakers have come to Kyiv and said, ‘We stand with you for as long as it takes’ — I mean, it all sounds kind of hollow right now, right?”

Additional reporting by Paola Tamma in Brussels

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