Major partners may cut aid to Ukraine: possible risks

Experts from the Kiel Institute for the World Economy do not rule out the possibility that aid to Ukraine from major partners may be significantly reduced in 2025.

Details: They make this forecast in their latest Ukraine Support Tracker study, published on 10 October, Ukrinform reports.

Quote: "Ukraine is facing uncertain times regarding continued support from its Western allies. A second term for Donald Trump as US President or leaning on new lending schemes such as the proposed Russian frozen asset or NATO contributions as a replacement for European aid could severely undermine Ukraine," the analysis says.

At the same time, the authors state that in the summer months of 2024, aid increased compared to the spring, mainly due to funds aimed at stabilising Ukraine's economy.

Overall, Ukraine received about €14.6 billion in aid from Western donor countries in July and August.

In July, most of the aid, totalling €5.5 billion, was of military nature.

In August, by contrast, €7.9 billion was allocated for financial assistance for economic stabilisation and reconstruction.

A significant contribution came from the EU's Ukraine Facility, which provided €2.8 billion in loans and €1.5 billion in grants. The US provided €3.5 billion in financial assistance, mainly through the World Bank. By comparison, humanitarian aid remained modest: €0.2 billion in July and less than €0.1 billion in August.

"Reconstruction aid and humanitarian aid are crucial, but these purposes remain surprisingly small. With the nearing winter, Western countries should start ramping up their help on reconstruction, especially of critical infrastructure and energy systems targeted by Russia," said Pietro Bomprezzi, Ukraine Support Tracker project manager.

Speaking about the main risks of a possible reduction in aid next year, the Kiel experts mention the possible election of Donald Trump, who could block further aid packages in Congress. They also mention the fact that Germany has announced that it will cut its budget allocations for military aid to Kyiv in half, and other European donors may follow suit.

If Western partners maintain the current level of effort, total assistance next year will be just over €100 billion, of which almost €59 billion will be military aid and €54 billion will be financial support.

Without new US aid packages, military aid would drop to around €34 billion, while financial aid would fall to around €46 billion. If European donors also cut back on their efforts, military aid would drop to €29 billion, and financial aid would fall to around €27 billion, the economists calculated.

Thus, under this scenario, total aid to Ukraine could be halved to around €55 billion.

At the same time, additional financing mechanisms, such as the recently discussed new NATO-coordinated contributions, could provide €40 billion in military aid. The amount of loans received from frozen Russian assets is also currently being discussed, but could amount to up to €45 billion, most of which would be used for direct financial assistance.

"The recently discussed new funding vehicles aren’t particularly large. If they are approved, they would offer valuable assistance but could prove to be just stopgap measures. As of now, these funds would not fully replace the steady bilateral aid that Ukraine needs," Bomprezzi said.

Background: The Council of the European Union has reached an agreement regarding a macro-financial assistance (MFA) package of up to €35bn for Ukraine, which will be part of a loan from the Group of Seven, using the proceeds from frozen Russian assets.

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