UK Treasury backs £3bn UKEF finance package for war-torn Ukraine

(Sky News, London, 3 August 2022) The UKEF credit facilities comprise up to £2.3bn for the financing of military contracts identified by the Ukrainian government, with the remaining £700m earmarked for reconstruction projects. Insiders speculated that companies such as BAE Systems and Babcock International were likely to be among those signing individual contracts with UKEF. Chancellor Nadhim Zahawi's backing for the deal is contingent upon the resolution of legal questions relating to "the compatibility of these facilities with our international subsidy control obligations". "Clearly Ukraine is a high-risk market in which to operate commercially, and we must acknowledge the risk of losses is significant," he wrote. "UKEF must also therefore continue to mitigate against Exchequer losses as far as is reasonably possible." The chancellor added that all individual contracts would also require Treasury approval. In March, International Trade Secretary Anne-Marie Trevelyan wrote to Louis Taylor, UKEF chief executive, instructing the agency to maintain its £3.5bn "market limit" for the country. Although the £3bn support is modest in the context of Ukraine's military and reconstruction needs, it underlines Britain's central role in providing internationally support to the country. A source close to UKEF said it had so far provided £23m in financial guarantees to Ukraine, including support for a commercial shipment of COVID-19 tests to the country's Ministry of Health before the Russian invasion. The Treasury and UKEF both declined to comment on the new credit facilities. The Council of the European Union, which represents the bloc's 27 individual member states, has agreed to send €1 billion ($1 billion) in financial aid to Ukraine as Russia's invasion intensifies. On August 28, Josep Borrell, Vice-President of the European Commission, noted that the E.U. has financed the delivery of military support to Ukraine to enable Ukraine to fight back, providing humanitarian support and macro-financial assistance, to keep the Ukrainian state afloat. In total, € 9.5 billion have been mobilised by Team Europe so far, with up to €8 billion in additional macro-financial assistance in the pipeline. The Biden administration is set to announce it will give Ukraine an additional $3bn worth of arms on the country’s independence day. The US has so provided $10.6bn in military help for Ukraine since the Russian invasion. It is not known if the U.S. Exim has been involved in any of these arms deals. Reuters notes that, per Ukrinform, Sweden will provide another $46.75 million in military aid to Ukraine.