European Union

Russia's parliament on Friday (4 March) passed a law imposing a jail term of up to 15 years for spreading intentionally "fake" news about the military, stepping up the information war over the conflict in Ukraine.

A majority of Swedes are in favour of joining NATO, a poll showed on Friday, with Russia's invasion of Ukraine spurring a rapid shift in attitudes in a country long known for neutrality.

Written by Sidonia Mazur.

While Ukraine has received considerable support from the EU and European financial institutions since 2014, Russia’s invasion of Ukraine, launched on 24 February 2022, has triggered a historic and twofold mobilisation of EU funds – for humanitarian action and military support. The European Commission has announced over €500 million in financing for humanitarian aid and the Council has decided to use the off-budget European Peace Facility (EPF) to assist Ukraine with €500 million in military aid. For the first time, the EU will direct its funds, €450 million, towards purchasing lethal weapons for a country at war, through the EPF. Should this funding prove insufficient, however, further mobilisation of the EU budget might be necessary. In its 1 March 2022 resolution, the European Parliament announced that it expects the EU and EU Member States ‘to activate any EU budget instruments available’.

State of play

Ukraine has developed a strong partnership with the European Union since 2014, including the signing and implementation of the EU-Ukraine Association Agreement. The EU has assisted Ukraine financially, with EU and European financial institutions allocating over €17 billion in grants and loans to Ukraine to support the implementation of a broad reform agenda. This includes €5.6 billion via five macro financial assistance programmes. The EU has allocated more than €193 million in humanitarian aid to Ukraine since 2014, to assist victims of the armed conflict in the east of Ukraine. The EU has also provided grants worth €200 million to help Ukraine fight the Covid‑19 pandemic.

The Russian military invasion of Ukraine has aggravated the existing humanitarian crisis in the east of Ukraine and triggered a new catastrophe. According to the United Nations High Commissioner for Refugees, over 1 million refugees have already fled Ukraine to neighbouring countries, mainly Poland, Hungary, Moldova, Slovakia, Romania and Russia. The European Commission estimates that up to 6.5 million people might be displaced, leading as many as 3.5 million to seek international protection, mainly in the EU. Many more millions will face extreme conditions while remaining in Ukraine.

The Russian invasion of Ukraine has caused a paradigm shift in the EU’s approach to financing lethal military equipment. For the first time, the EU will purchase lethal weapons. The financial tool enabling this acquisition is the new European Peace Facility.

Since the beginning of 2022, the military threat to Ukraine has weighed heavily on investor confidence, causing a steady outflow of capital that has endangered Ukraine’s economic and financial stability.

EU response Humanitarian assistance

As the humanitarian situation in Ukraine deteriorates, the European Commission is providing emergency assistance. On 28 February 2022, the Commission announced €90 million for emergency aid programmes to help civilians in Ukraine and those displaced to Moldova. This EU humanitarian aid will provide food, water, health, shelter and help cover people’s basic needs.

The EU Civil Protection Mechanism has been activated, with offers from Member States including essential medical care items and civil protection support.

On 1 March 2022, the European Commission announced an additional €500 million from the EU budget for humanitarian aid in Ukraine and for refugees from Ukraine. It should be noted that the entire EU budget allocation for humanitarian aid worldwide for 2022 is slightly over €2 billion.

Military assistance

Under Article 41(2) TEU, the EU budget cannot be used to finance expenditure having military or defence implications, meaning common foreign and security policy (CFSP) operations outside the EU. However, Article 41(2) TEU also provides that such expenditure can be charged to the Member States. The novel European Peace Facility (EPF), created in 2021, is a financial tool outside the EU budget, financed by EU Member States based on a distribution key linked to gross national income. Using the EPF enables the EU to provide the armed forces of partner countries with infrastructure and equipment, including weapons. On 28 February 2022, the Council published its decision ((CFSP) 2022/338) on an assistance measure under the EPF for the supply of military equipment and platforms designed to deliver lethal force to the Ukrainian Armed Forces. The amount decided is €450 million for lethal arms and lethal assistance. It should be noted that the total budget for the EPF for 2022 is €540 million. This constitutes a paradigm shift, as the European Union is financing the acquisition of arms for the first time. Austria, Ireland and Malta are not participating in this measure.

At the same time the Council adopted a decision (CFSP) 2022/339 on an assistance measure under the EPF to provide the Ukrainian Armed Forces with €50 million in support. The measure shall finance the provision of equipment and supplies not designed to deliver lethal force, such as personal protective equipment, first aid kits and fuel. All EU Member States will participate.

European Parliament response

The European Parliament strongly condemns the Russian Federation’s aggression and invasion of Ukraine. In its resolution of 1 March 2022, the Parliament called ‘for the EU and its Member States to continue providing the strongest possible economic and financial support to Ukraine, as well as macro-financial and technical assistance wherever needed, including in defence- and security-related areas, to activate any EU budget instruments available and to develop a long-term strategy to support Ukraine’s efforts in strengthening the resilience of its democratic institutions and economy’. Moreover Parliament called for ‘the EU institutions to work towards granting EU candidate status to Ukraine, in line with Article 49 of the Treaty on European Union and on the basis of merit, and, in the meantime, to continue to work towards its integration into the EU single market along the lines of the Association Agreement’.

On 16 February, the European Parliament approved a €1.2 billion macro-financial loan to help Ukraine cover its external financing needs in 2022. Even before the 24 February Russian invasion, Ukraine faced significant economic challenges, which will worsen even further under the current circumstances. The loan is expected to be paid out to Ukraine during the next 12 months, in two tranches, the first being due in March 2022.

Possible further developments

The EU is equipped with a plethora of programmes aimed at supporting EU external action. These programmes are financed mainly by the EU budget. As the situation in Ukraine evolves, different elements of this system can be mobilised. The same applies to the financing of the needs relating to facilitating the welcome for refugees from Ukraine in the EU.

If the financing needs related to supporting Ukraine and those fleeing the invasion go beyond the multiannual financial framework 2020-2027 (MFF) agreement, there might be a need to use flexibility or even revise the MFF spending ceilings. This is a political and budgetary process that would need to involve both the Council and the European Parliament.

(The figures used in this briefing reflect the situation as of 3 March 2022 at 18:00 CET.)

Read this ‘at a glance’ on ‘Russia’s war on Ukraine: EU budget response‘ in the Think Tank pages of the European Parliament.

The European Commission suspended EU cooperation with Russian research institutions this week, and a number of EU countries followed suit, but the details of what this means for broader academic collaboration remain a subject of debate. 

Gas and oil prices have hit new highs this week, with crude oil prices surpassing $110 per barrel for the first time since 2014, as the war in Ukraine caused panic on energy markets.

EU ministers unanimously agreed to offer temporary protection to refugees fleeing Ukraine during a meeting on Thursday (4 March), as a million have left the country.

Welcome to EURACTIV’s Digital Brief, your weekly update on all things digital in the EU. You can subscribe to the newsletter here.    “We will not let Kremlin apologists pour their toxic lies justifying Putin’s war or sow the seeds of division...

The EU should end so-called golden passports which allow rich people to obtain EU citizenship in exchange for investment. MEPs vote on the proposal during the March plenary.

Source : © European Union, 2022 - EP

The EU should end so-called golden passports which allow rich people to obtain EU citizenship in exchange for investment. MEPs vote on the proposal during the March plenary.

Source : © European Union, 2022 - EP

The government in Kyiv is looking to the West to protect its energy security and prevent a nuclear disaster after Russian forces in Ukraine seized the country’s largest nuclear power plant overnight.

The goal of the meeting, said the UN atomic chief, would be to seek agreements among the combatants to ensure nuclear safety is not compromised again as a result of the military conflict.

This week, EURACTIV's agrifood team gives you the run down on the impact of the war on Ukraine on the EU's agrifood sector and are joined by EURACTIV's Alice Taylor

European Parliament President Roberta Metsola hosted a meeting with Speakers of the European Union’s National Parliaments and the Speaker of the Verkhovna Rada of Ukraine Ruslan Stefanchuk.

Source : © European Union, 2022 - EP

European Parliament President Roberta Metsola hosted a meeting with Speakers of the European Union’s National Parliaments and the Speaker of the Verkhovna Rada of Ukraine Ruslan Stefanchuk.

Source : © European Union, 2022 - EP

Written by Carla Stamegna and Lasse Boehm.

As a system for standardised payment instructions and messaging services, SWIFT has become the basis for most global financial transactions. On 2 March 2022, the Council decided to cut seven Russian banks from the SWIFT network, as part of a wider sanctions package, including sanctions against Russia’s central bank.

State of play

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a global provider of secure financial messaging services, linking more than 11 000 banks worldwide. A co-operative society under Belgian law, it is owned by its members and headquartered in La Hulpe, Belgium. Formed in 1973, SWIFT has replaced the Telex technology then widely used by banks to communicate instructions relating to cross-border money and security transfers.

In 2021, SWIFT’s FIN messaging service recorded an average of 42 million messages per day, making it the backbone of the world’s financial infrastructure. Through SWIFT’s standardised messages, banks, custodians, investment institutions, central banks, market infrastructures and corporate clients can connect with one another to make payments or settle trades. SWIFT thereby sets the standard mandatory and optional data elements for payments, such as the business identifier code, known as a ‘BIC’ or ‘SWIFT code’.

Russia has developed its own SWIFT-type ‘Financial Messaging System of the Bank of Russia’ (SPFS). In operation since 2014, it has around 400 users and operates within Russia. Russia could also use other financial messaging systems, which nevertheless do not match SWIFT in market reach. One example is the Chinese ‘Cross-Border Interbank Payment System’ (CIPS), set-up in 2015, under the supervision of the People’s Bank of China.

EU response

Parliament had already called for the EU to consider ‘the exclusion of Russia from the SWIFT payment system’ to deter Russian authorities from further aggression, in its recommendation to the Council of 16 September 2021. On 2 March 2022, the Council of the European Union decided to prohibit the provision of SWIFT services to seven Russian banks: Bank Otkritie, Novikombank, Promsvyazbank, Rossiya Bank, Sovcombank, VNESHECONOMBANK (VEB), and VTB BANK. This will take effect from 12 March 2022. The prohibition will also apply to any legal person, entity or body established in Russia whose proprietary rights are more than 50 % directly or indirectly owned by these banks.

Sberbank, Russia’s largest lender and Gazprombank were not included in the list of sanctioned banks, as both banks are the main counterparts for payments for Russian oil and gas. However, Sberbank was ordered to close its European arm by the European Central Bank (ECB), which assessed that the bank is likely to fail.

Other sanctions against Russia’s financial sector, taken on 2 March 2022, include:

• prohibition of investment or participation in projects co-financed by the Russian Direct Investment Fund (RDIF), the Russian sovereign wealth fund established in 2011;
• a ban on the sale, supply, transfer or export of euro denominated banknotes to Russia or to any natural or legal person, entity or body in Russia, including the government and the Central Bank of Russia, or for use in Russia.

The Council had already decided on sanctions against Russia’s central bank on 28 February 2022. These include the prohibition of all transactions related to the management of reserves or assets of the Central Bank of Russia. These sanctions will prevent Russia’s central bank from accessing a significant part of its reserves denominated in euros and dollars. The EU has also imposed further sanctions targeting individuals and economic sectors.

Read this ‘at a glance’ on ‘Russia’s war on Ukraine: Cutting certain Russian banks off from SWIFT‘ in the Think Tank pages of the European Parliament.

Members will discuss the situation in Ukraine, vote on recommendations to protect against foreign interference and mark International Women’s Day during March's plenary session.

Source : © European Union, 2022 - EP

Members will discuss the situation in Ukraine, vote on recommendations to protect against foreign interference and mark International Women’s Day during March's plenary session.

Source : © European Union, 2022 - EP

Plenary session, Strasbourg

Source : © European Union, 2022 - EP

The Russian president is showing no signs of relenting in the war against Ukraine. After a telephone conversation with Putin, French President Macron said that the worst was yet to come. Kyiv evoked "nuclear terror" in the wake of the shelling of the site of the Zaporizhzhia nuclear power plant and urgently called for more weapons. European commentators ask whether peace is at all possible.