Regulation (EU) 2024/792 of the European Parliament and of the Council of 29 February 2024 establishing the Ukraine Facility

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 212 and Article 322(1) thereof,

Having regard to the proposal from the European Commission,

Having regard to the opinion of the European Court of Auditors (1),

Acting in accordance with the ordinary legislative procedure (2),

Whereas:

(1) Since the beginning of Russia’s unprovoked and unjustified war of aggression against Ukraine on 24 February 2022, the Union, its Member States and European financial institutions have mobilised unprecedented support for Ukraine’s economic, social and financial resilience. That support combines support from the Union budget, including exceptional macro-financial assistance and support from the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), fully or partially guaranteed by the Union budget, as well as further financial support by Member States.

(2) The European Council of 23 June 2022 decided to grant the status of candidate country to Ukraine, which expressed a strong will to link reconstruction with reforms on its European path. Ongoing strong support to Ukraine is a key priority for the Union and an appropriate response to the Union’s strong political commitment to support Ukraine for as long as necessary.

(3) The provision by the Union of macro-financial assistance of up to EUR 18 billion for 2023 under Regulation (EU) 2022/2463 of the European Parliament and of the Council (3) was considered an appropriate response to Ukraine’s financing gap for 2023 and helped to mobilise significant financing from other donors and international financial institutions. This constituted a major contributing factor to Ukraine’s macroeconomic and financial resilience at a critical time.

(4) The Union has also provided significant financial support through an additional package combining funds under the Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI-Global Europe) established by Regulation (EU) 2021/947 of the European Parliament and of the Council (4) and loans by the EIB. In addition, continuous support is being provided by Member State authorities, communities, NGOs and volunteer groups.

(5) In addition, the Council decided on off-budget assistance measures to support the Ukrainian armed forces under the European Peace Facility established by Council Decision (CFSP) 2021/509 (5), in the amount of EUR 6,1 billion, and, by Council Decision (CFSP) 2022/1968 (6), established a Military Assistance Mission in support of Ukraine with EUR 0,1 billion for the common costs. The Union and its Member States have also delivered an unprecedented in-kind emergency response via the Union Civil Protection Mechanism established by Decision No 1313/2013/EU of the European Parliament and of the Council (7), constituting the largest emergency operation since the creation of that mechanism.

(6) Furthermore, the EU-Ukraine Solidarity Lanes established in May 2022 have contributed to generating an estimated export value of EUR 31 billion for the Ukrainian economy until the end of May 2023.

(7) Russia’s war of aggression against Ukraine has caused damages in Ukraine amounting to more than EUR 270 billion as of 24 February 2023, and reconstruction costs estimated at EUR 384 billion, as well as a loss of access to financial markets and a significant drop in public revenue, while public expenditure to address the humanitarian situation and to maintain the continuity of public services has increased significantly. Those estimates, as well as the analytical information from all other appropriate and subsequent sources, provide a relevant basis to establish the respective funding needs for the coming years, including regional and sectoral considerations.

(8) On 30 March 2023, the International Monetary Fund (IMF) estimated the state financing gap up to 2027 at EUR 75,1 billion and agreed with Ukraine a EUR 14,4 billion four-year programme to anchor policies that sustain fiscal, external, price and financial stability and support economic recovery, while enhancing governance and strengthening institutions to promote long-term growth in the context of post-war reconstruction and Ukraine’s path of accession to the Union.

(9) In light of Russia’s war of aggression against Ukraine, a residual gap remains in Ukraine’s financing needs. Therefore, significant and flexible support to the Ukrainian government is needed for it to maintain its functions, provide public services, as well as to support the recovery, reconstruction and modernisation of the country.

(10) Given the damage to the Ukrainian economy, society and infrastructure caused by Russia’s war of aggression, Ukraine will require significant support and institutional capacity to maintain its functions, as well as short-term relief and assistance for the fast recovery, reconstruction and modernisation of the country. Ukraine will require comprehensive support to ‘build back better’ through a people-centred recovery that creates the foundations for a free, culturally vibrant and prosperous country with a resilient economy that is well integrated into the European and global economy, anchored in Union values and progressing towards accession to the Union.

(11) In this context, it is necessary to set up an exceptional medium-term single instrument that brings together the bilateral support provided by the Union to Ukraine, ensuring coordination and efficiency. To that end, it is necessary to establish a Ukraine Facility (the ‘Facility’) for the period 2024 to 2027, providing a balance between flexibility and programmability of the Union’s response to address Ukraine’s financing gap and recovery, reconstruction and modernisation needs, while at the same time supporting Ukraine’s reforms effort as part of its accession path to the Union.

(12) Given the exceptional nature of the Facility, it is important that it is underpinned by a coherent and prioritised plan for the reconstruction of Ukraine (the ‘Ukraine Plan’), which should be prepared by the Government of Ukraine with due involvement of the Verkhovna Rada of Ukraine and representatives of civil society organisations, providing a structured and predictable framework for the recovery, reconstruction and modernisation of Ukraine clearly articulated with Union accession requirements.

(13) Union support to Ukraine from 2024 to 2027 should be provided primarily and mainly under the Facility, avoiding any potential overlap with other programmes, in particular the Instrument for Pre-Accession assistance established by Regulation (EU) 2021/1529 of the European Parliament and of the Council (8), and ensuring a consistent approach through a unified instrument, by replacing or, where appropriate, complementing activities under the existing instruments. Support under the Facility does not prejudge future assistance to Ukraine and its possibility to participate in Union programmes under the post-2027 multiannual financial framework.

(14) In this regard, Union support under the Facility should replace the bilateral support provided under NDICI-Global Europe. It is nevertheless important to ensure that Ukraine can continue to benefit from regional, thematic, rapid response, and other forms of support under NDICI-Global Europe, in particular cross-border cooperation programmes, and more generally continue to advance regional, macro-regional and cross-border cooperation and territorial development, including through the implementation of Union macro-regional strategies.

(15) Humanitarian aid, defence and support to Member States providing protection for people fleeing the war in Ukraine should be adequately and consistently provided outside the Facility. Ukraine can continue to benefit from relevant existing Union programmes within the Union budget, such as NDICI-Global Europe for activities referred to in recital 14, the European Instrument for International Nuclear Safety Cooperation established by Council Regulation (Euratom) 2021/948 (9), humanitarian aid in accordance with Council Regulation (EC) No 1257/96 (10), and activities under the Common Foreign and Security Policy, as well as measures under the European Peace Facility outside the Union budget. Furthermore, Ukrainian entities can participate in internal policy programmes of the Union such as Horizon Europe established by Regulation (EU) 2021/695 of the European Parliament and of the Council (11), Research and Training Programme of the European Atomic Energy Community established by Council Regulation (Euratom) 2021/765 (12), Digital Europe Programme established by Regulation (EU) 2021/694 of the European Parliament and of the Council (13), ‘Fiscalis’ programme for cooperation in the field of taxation established by Regulation (EU) 2021/847 of the European Parliament and of the Council (14), Customs programme for cooperation in the field of Customs established by Regulation (EU) 2021/444 of the European Parliament and of the Council (15), Erasmus+ established by Regulation (EU) 2021/817 of the European Parliament and of the Council (16), EU4Health Programme established by Regulation (EU) 2021/522 of the European Parliament and of the Council (17), Creative Europe Programme established by Regulation (EU) 2021/818 of the European Parliament and of the Council (18), Programme for the Environment and Climate Action (LIFE) established by Regulation (EU) 2021/783 of the European Parliament and of the Council (19), Single Market Programme established by Regulation (EU) 2021/690 of the European Parliament and of the Council (20), Union Civil Protection Mechanism, Connecting Europe Facility established by Regulation (EU) 2021/1153 of the European Parliament and of the Council (21) and Union Anti-Fraud Programme established by Regulation (EU) 2021/785 of the European Parliament and of the Council (22) as well as other relevant programmes in accordance with their respective rules, objectives and the relevant association agreements.

(16) The Facility should contribute to closing the funding gap of Ukraine until 2027 by providing non-repayable support and highly concessional loans in a predictable, continuous, orderly and timely manner. The support under the Facility should help maintain macro-financial stability in Ukraine and ease Ukraine’s external financing constraints.

(17) It is important that investment in Ukraine’s sustainable recovery, reconstruction and modernisation under the Facility starts as a matter of urgency to help providing decent living conditions for the Ukrainian population and reconstructing critical infrastructure, where possible, to ensure generation of employment and revenues and to progressively lower the volume of international assistance needed, while mitigating environmental damage to the extent possible in a war-torn country and supporting Ukraine in the green transition.

(18) The medium-term perspective provided by the Ukraine Plan through a single instrument should also encourage Ukraine to channel investments and reforms towards the transition to a green, sustainable, digital and inclusive economy, and help mobilise like-minded donors, including from the private sector, for multiannual contributions to support Ukraine. Investments should be aligned, to the extent possible, with the Union climate and environmental acquis, and be consistent with the implementation of Ukraine’s National Energy and Climate Plan.

(19) The recovery, reconstruction and modernisation effort should build on Ukraine’s ownership, close cooperation and coordination with supporting countries and organisations, and Ukraine’s path towards accession to the Union. Ukraine’s local and regional administrations as well as Ukrainian civil society organisations are also expected to play an important role in this process by participating in its design and scrutiny. Peer-to-peer cooperation and programmes embedded in partnerships between cities and regions in the Union and those in Ukraine have already facilitated the delivery of humanitarian aid, and other forms of assistance, to Ukraine and thus provide a basis to enrich and accelerate the recovery, reconstruction and modernisation process.

(20) The Union should also foster close consultation and association of local and regional authorities, which embrace a large variety of sub-national levels and branches of government, including regions, municipalities, rayons and hromadas and their associations, as well as close consultation and participation of Ukrainian civil society organisations. The Union should encourage their meaningful participation in the recovery, reconstruction and modernisation of Ukraine, based on sustainable development and through the implementation of the Sustainable Development Goals at local and regional level. The Union should recognise and support the multiple roles played by the local and regional authorities as promoters of an inclusive territorial approach to local development, including decentralisation processes, participation of civil society organisations and local communities, transparency and accountability, and should further enhance its support for local and regional authorities’ capacity building, including for the implementation of projects under the Facility, in line with the principle of local self-government as defined in the European Charter of Local Self-Government, to which Ukraine is a Party.

(21) The Union should provide support to the transition towards accession for the benefit of Ukraine, drawing on the experience of the Member States. That support should focus particularly on the sharing of experience that was acquired by the Member States during their own reform processes.

(22) Support under the Facility should also build on and maximise synergies with key organisations supporting Ukraine’s reforms and reconstruction, such as the EIB Group, international financial institutions including the World Bank, the Organisation for Economic Co-operation and Development, and the IMF; and European multilateral financial institutions, including the EBRD and the Council of Europe Development Bank; and bilateral financial institutions such as development banks and export credit agencies.

(23) Given the uncertainties linked to the war, it is appropriate that the Facility should be able to provide support to Ukraine in duly justified exceptional circumstances, in particular in the event of a significant deterioration of the war, and in order to maintain its macro-financial stability and to ensure the achievement of the objectives of the Facility. Such exceptional financing should be provided for individual periods of up to three months and should be provided only through a Council implementing decision upon a proposal from the Commission, if it is concluded that it is impossible for Ukraine to fulfil the conditions attached to the forms of support under the Facility, when it is the beneficiary of the support, and should cease as soon as the fulfilment of those conditions becomes possible again. Such exceptional financing should not affect funding from other specific Union instruments which should be mobilised in cases of natural disasters or other humanitarian or civil protection emergencies. If necessary, exceptional financing could be available under the Facility before the adoption of the Ukraine Plan and the conclusion of the Framework Agreement. It could be additional to exceptional bridge financing, as applicable.

(24) The enlargement policy framework defined by the European Council and the Council, the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other part (23) (the ‘Association Agreement’), including a Deep and Comprehensive Free Trade Area, multilateral agreements to which the Union is a party and other agreements that establish a legally-binding relationship with Ukraine, as well as resolutions of the European Parliament, communications of the Commission and joint communications of the Commission and the High Representative of the Union for Foreign Affairs and Security Policy should constitute the overall policy framework for the implementation of this Regulation. The Commission should ensure coherence between support under the Facility and the enlargement policy framework.

(25) Article 49 of the Treaty on European Union (TEU) provides that any European State which respects the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities, and is committed to promoting those values, may apply to become a member of the Union. Those values are common to the Member States in a society in which inclusiveness, pluralism, non-discrimination, tolerance, justice, solidarity and gender equality prevail.

(26) A European State which has applied to join the Union can become a member of the Union only where it has been confirmed that it fully meets the accession criteria established at the Copenhagen European Council in June 1993 (the ‘Copenhagen criteria’) and provided that the Union has the capacity to integrate the new member. The Copenhagen criteria relate to the stability of institutions which guarantee democracy, the rule of law, human rights and respect for and protection of minorities, the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union, and the ability to assume not only the rights but also the obligations under the Treaties, including the pursuit of the aims of political, economic and monetary union.

(27) It is in the common interests of the Union and Ukraine to advance the efforts of Ukraine to reform its political, legal and economic systems with a view to Union membership. Granting the status of candidate country to Ukraine is a geostrategic investment of the Union in peace, security, stability and prosperity in Europe and allows the Union to be better positioned to address global challenges. It also provides increased economic and trade opportunities for the mutual benefit of the Union and Ukraine, while supporting a gradual transformation of the country. The prospect of Union membership has a powerful transformative effect, embedding positive democratic, political, economic and societal change.

(28) Embracing and committing to core Union values is a choice and is essential for Ukraine’s aspiration to Union membership. In line with this, it is important that Ukraine takes ownership and fully commits to Union values as well as to upholding a global order based on rules and values and vigorously pursues the necessary reforms in the interests of its people.