What is the European Peace Facility and why Hungary is blocking the disbursements to Ukraine

European Union officials are looking for ways to bypass Hungary’s veto on the military assistance for Ukraine disbursed through the European Peace Facility (EPF).

Budapest has been blocking the transfer of €6.6 billion for about a year and a half, drawing condemnation from other member states and Ukraine which has been facing difficulties on the battlefield as winter approached.

But what exactly is the EPF?

The facility was created in March 2021, before the Russian war on Ukraine, as an instrument aimed at enhancing the EU’s ability to prevent conflicts, build and preserve peace and strengthen international security and stability. 

The EU’s High Representative, Josep Borrell, wanted a way to facilitate the delivery of military aid to partner countries and fund the deployment of EU military missions abroad under the Common Foreign and Security Policy (CFSP).  

According to Tinatin Akhvlediani, research fellow at the EU foreign policy unit of the CEPS think tank, the EPF was founded on two pillars: “One is to fund all the EU operations under EU’s common foreign and security policy, so this is EU operation, but also another pillar which comes on the assistance that you need to provide all the third non-EU countries to provide and strengthen security in the region.”

“As we have (seen from) the outbreaks of the war in the EU’s neighbourhood or in the Middle East, obviously (the) EU channels more money to build and preserve and strengthen security in those non-EU countries,” she added.

The facility was initially allocated €5 billion for the 2021–2027 cycle but its budget was vastly expanded after Russia’s full-scale invasion of Ukraine started as it started being used by the EU to partially reimburse member states for the weapons and ammunition donated to Kyiv. 

Successive top-ups have taken its budget to roughly €17 billion for the 2021-2027 period, Akhvlediani said, of which €11 billion are earmarked for Ukraine.

Why Hungary is vetoing the decisions?

As it is not part of the EU budget – the money comes from member states’ contributions – any decision including on disbursement for Ukraine needs to be approved unanimously by the 27 member states, allowing Hungarian Prime Minister to wield a veto.

“Part of the EPF money could also be used for the Ukraine’s reconstruction, meaning allowing Ukraine to keep its country afloat. But most of the money, of course, goes to the defence and security sector. So the latest split when some money was channelled to Ukraine was 90% to the military, defence sector and only 10% to Ukraine facility, which is then reserved for Ukraine for construction,” Akhvlediani said. 

“Hungary, and particularly Orban, has been very publicly vocal that he is against providing more support to Ukraine. And of course, he also plays the game in relation with what happens in the US politics because he has very friendly relations with Donald Trump and he apparently does not, you know, want to book all the supports to Ukraine. So just in case Trump comes back to the office, Trump is not also signed up to contribute to providing more loans to Ukraine,” she added. 

The support to Ukraine was again on the agenda of Foreign Ministers in Luxemburg on Monday. To bypass Hungary’s firmly held veto on military assistance for Ukraine, European Union officials and diplomats are exploring a new plan. 

“To bypass Orban’s veto, in a way, the member states, of course, could agree on voluntary contributions. That’s what we’ve heard from the High Representative, Josep Borrell. But another way out is, in a way, to provide some exceptional macro-financial assistance which then can be linked to the EU budget, not to the EPF. But this has to be still confirmed by the European Parliament,” according to Akhvlediani.  

Discussions are ongoing.