In the event of non-repayment or loss of funds, European taxpayers would be left paying the bill.
"I would like to express our horror at the loss of life and suffering caused by Russia's military aggression towards Ukraine, an act which we utterly deplore," said European Investment Bank (EIB) President in the aftermath of the Russian invasion. He added in the : "We stand ready to urgently mobilise further financial support to the country as part of a coordinated EU and international response to this unprecedented crisis.”
The EIB has already financed 54 projects in Ukraine since 2007, totalling almost €8bn. By comparison, this amount is equivalent to almost twice the subscribed capital of Germany as the main shareholder of the investment bank.
In 2021 alone, the EIB invested more than half a billion euros in support of Ukraine's economic and social growth, specifically in the development of vital infrastructure throughout the country, as well as in SMEs, resilience to covid-19 and the modernisation of the transport and education systems there. With such projects, Ukraine is the largest beneficiary country of EIB investments in its Eastern Neighbourhood Programme, accounting for over 60% of the bank's lending.
The majority of the funds allocated to Ukraine--nearly 36%--are in the transport sector. Flagship projects include the €100m upgrade of the Kyiv metro, €160m to extend a metro line in the capital, some €160m for the continuation of the Kharkiv metro, a €300m budget to improve the country's roads and public transport, and €150m to improve the national railway network.
A deep sense of cooperation
According to a Ukrainian expatriate in Luxembourg interviewed by , Delano’s sister publication, the project to modernise the Kyiv metro has left its mark on people's minds: "The realisation of the new Kyiv metro project has changed the lives of many people by improving their daily lives,” he says. "Beyond the new appearance, the fact that the cars were financed with partial support from the EIB is quite visible… thanks to inscriptions mentioning it." The same is true in Kharkiv, where public transport was still in a state of disrepair when our source did part of his studies there, unlike today.
Another highlight in the EIB's list of Ukrainian operations is the Ukraine Recovery Programme, totalling €340m, which finances several hundred small and medium-sized projects at local level in the Donetsk and Luhansk regions, close to the self-proclaimed pro-Russian separatist republics. These funds are expected to improve the daily lives of a population of 13.7m.
Our Ukrainian source in Luxembourg is familiar with these projects: "On the spot, people have felt the support of international donors. With these investments, the reconstruction of schools, kindergartens and other facilities was successfully carried out, sometimes from scratch. People gradually began to believe that they could start building something good with the help of Western countries."
Despite this, the threat of a Russian invasion of the country has arrived: "From what I understand, people are a bit frustrated today because they have nice new schools, but there is now the possibility that these facilities will be destroyed by Russian military action or occupied by the administration of the independence republics."
A risk of destruction
When asked by Paperjam, the EIB said it does not finance any projects on the territory controlled by the administrations of the breakaway republics. However, as soon as Russian military operations were launched on Ukrainian soil, the EIB was unable to provide information on the measures it would take to ensure the continuity of its projects in the event of Russian occupation of the country. Some of their staff and consultants in the field have been sometimes difficult to contact at the moment.
With operations financed throughout Ukraine, a majority of EIB projects are now in theatres of war. However, the EIB could not explain how it manages geopolitical risks--including the risk of armed conflict-- in the implementation of its projects. On the other hand, a source familiar with the projects says that the risk of war remains minimal in all operations financed by the EIB.
In addition to the risk of EIB-financed projects being destroyed, the international media have reported that the Kremlin's intention is to overthrow the Ukrainian regime and install a government more favourable to it. In such a scenario, what would happen to the repayment of the funds disbursed? In this respect, the EIB explains that its operations outside the EU, including all current loans in Ukraine, are guaranteed by the European Commission's budget--the Ukrainian government does not guarantee EIB operations. In this sense, a favourable wind suggests that it is essential that the risk of armed conflict outside the EU is not on the EIB's budget, as the fundamental principle of its operation is based on its triple-A rating, which allows it to borrow on the capital markets at very low rates and on favourable terms over the long term.
A risk of diversion and obstruction
In addition to the risk of default--or refusal--of payment in the event of the installation of a new pro-Russian regime in Kyiv, there is also the risk that the latter will divert part of the allocated funds or obstruct the supervision and investigations carried out by European bodies on the allocated budgets. Asked by Paperjam about this, the EU's anti-fraud office, Olaf, replied that it had finalised six cases linked to Ukraine between 2015 and 2020, without providing any further information on the content of the files.
However, the EU watchdog says it is closely monitoring current events and will follow the consequences for the fight against fraud. Olaf also has a liaison officer in Ukraine. In addition, the European anti-fraud body has cooperation agreements with several Ukrainian police and judicial authorities. This cooperation could end overnight if Moscow wins.
The Luxembourg-based European Public Prosecutor's Office (EPPO), which is responsible for prosecuting crimes against the financial interests of the European Union, has refused to discuss the possibility of ongoing investigations related to Ukraine. On the other hand, the European Prosecutor's Office confirms that it is currently engaged in discussions with the Ukrainian General Prosecutor's Office on a possible agreement to facilitate cooperation in investigations related to its mandate and competences. This cooperation may never come to fruition.
A Moscow victory in its bid to conquer Ukraine would therefore put at risk the €8bn disbursed by the EIB for the improvement of the daily life of Ukrainians, the rule of law, education and the modernisation of the country. This is without taking into account the fact that the new regime in place would benefit from all these advantages without having disbursed a single euro and without any promise of repayment. In addition to EIB funds, Ukraine benefits from projects financed by the European Commission under its Neighbourhood Policy, the European Bank for Reconstruction and Development (EBRD) and national development cooperation bodies from the member states.
This article was originally published on and has been translated and edited for Delano.