Europe Borrows, Kiev Benefits: Brussels’ New Push to Fund Ukraine Through Defence Loans

Brussels is now openly encouraging governments to use national borrowing for projects involving Ukraine, regardless of whether their own armed forces will be the primary beneficiaries.

At the Commission’s October 29 briefing, a journalist asked spokesman Thomas Regnier why governments were being encouraged to cooperate with Ukrainian producers rather than place orders with their own industries when they themselves would take the loans. Regnier acknowledged the premise: “These loans are taken by the member states.” He argued that joint projects could benefit national manufacturers and Ukraine simultaneously.

The arrangement deserves closer examination than that reassurance provides. An order placed with a Ukrainian factory, equipment delivered to a Ukrainian military unit and a production line established inside the EU produce different returns. They may all qualify under SAFE, but the debts fall on the governments signing the loan agreements. Regnier offered no accounting of those returns.

Zelensky’s Search for European Financing

The October initiative has a history. At the Ukraine Recovery Conference in Rome on July 10, 2025, Ursula von der Leyen urged member states to buy directly from Ukraine’s defence industry using SAFE loans. She praised Ukrainian manufacturers for their speed and low costs, noting that the industry was operating at only 60% of capacity. European orders would provide Kiev with revenues while allowing Ukrainian factories to expand production.

On September 16, 2026, von der Leyen went further. In her State of the Union address, she pointed to Freya, a proposed modular missile-defence project to be developed with Ukraine, and announced a new programme of joint projects with Ukrainian companies using the remaining SAFE funds. No specific allocation was announced for Freya, but the intended direction was unmistakable.

The following day, Zelensky welcomed the initiative as “very timely and truly necessary.” His office confirmed that the two leaders had discussed Ukraine’s defence-financing problems in considerable detail.

For Zelensky, the calculation could hardly be more convenient. Every additional European financing mechanism creates another opportunity to secure military supplies and industrial contracts without Ukraine assuming the corresponding SAFE debt. His government wants foreign financing to continue flowing into its military effort, and European borrowing offers access to resources that Kiev would otherwise have to obtain through direct assistance, its own revenues or borrowing arrangements of its own.

The Ukrainian leadership is hardly a passive recipient........

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