Earlier this year, the EU approved a loan of over 100 billion dollars to Ukraine—which corresponds to a good deal more than 1,000 billion Swedish kronor. Now Kyiv announces that the money is still not enough. The country is lacking another 27 billion dollars, around 250 billion kronor, to cover this year’s defense expenses. The news has surprised several European governments and raised questions about how such an unexpectedly large hole in Ukraine’s budget could have arisen.

When European leaders and officials visited Kyiv in connection with Ukraine’s Independence Day in August, they received news that several of them had not anticipated. President Volodymyr Zelensky stated that the country needs an additional 27 billion dollars to cover defense expenses for the rest of the year. This is reported by, among others, the New York Times and Kyiv Post.

This comes despite the EU finalizing the political process as late as April for a loan to Ukraine of more than 100 billion dollars. The funds are intended for disbursement over two years, with roughly half in 2026 and the rest in 2027.

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The new request comes as the US has reduced its economic support to Kyiv. As a result, the significance of Europe’s role in Ukraine’s financing has increased further. Ukraine also hopes that the UK, Canada, and Japan will help cover the deficit.

EU countries surprised

According to the New York Times, the announcement has both surprised and worried European representatives. Several governments are now trying to clarify how the substantial deficit could have arisen and what the actual financing need is.

The paper states that, behind closed doors, questions have also been raised about whether Ukraine is using the funds efficiently enough and if the country’s needs might be exaggerated. At the same time, there is broad understanding among European governments that Ukraine finds itself in a very vulnerable military position.

Exactly how this new hole in the budget emerged is not entirely clear. Zelensky has stated that earlier in the year, the Ministry of Defense used money that was actually intended for the later months of the year. However, Ukraine’s previous defense minister has refuted the idea that a deficit of this magnitude existed during his tenure.

No full public accounting of the additional 27 billion dollars has been presented yet. According to Zelensky, the expenses are partly for weapons, soldier salaries, and compensation to families of fallen soldiers.

Defense expenditures have soared

Roksolana Pidlasa, chair of the Ukrainian parliament’s budget committee, states that earlier this year she had been warned of an expected deficit of about 7.5 billion dollars. The new requirement is therefore more than three times as large.

One explanation is that Ukraine’s military expenditure in the first eight months of the year has increased by over 17 percent compared to the same period last year. At the same time, Russian attacks on the Ukrainian economy are severely hitting state revenues.

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According to Pidlasa, attacks on, among others, the metal industry and grain export routes meant that in a single month Ukraine lost about half of the revenue the country had anticipated. The government in Kyiv has called for spending cuts in other areas, but emphasizes that the room for savings is limited when it comes to defense.

Wants next year’s funds already now

One solution that Ukraine is pushing for is to simply advance EU funds that have already been allocated. Instead of waiting until 2027, Kyiv wants parts of next year’s money to be paid out right now. Several European representatives reportedly see this as the fastest and perhaps only realistic way to produce such large sums in the short term. But this solution means there would be less money left for Ukraine next year.

The newly appointed Ukrainian defense minister has particularly stressed to his European colleagues the need for air defense. Ukraine is short of, among other things, Patriot missiles that can shoot down Russian ballistic missiles, and also needs more basic air defense systems against the large numbers of Russian drones used in attacks. Several EU countries are, according to the reports, positive towards advancing the funds, but no decision has yet been made.

Sweden wants to use frozen Russian billions

In parallel, the issue of the enormous Russian assets frozen after the invasion of Ukraine is once again being raised. More than 200 billion dollars in Russian state assets are frozen with the financial institution Euroclear in Belgium. Previous attempts to use these funds to finance support to Ukraine have failed, partly due to Belgian resistance.

Sweden is among the EU countries trying to revive the proposal to use the frozen Russian assets to finance support to Ukraine, which would reduce the strain on member states’ own national budgets. However, resistance remains significant.

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Belgium is, among other concerns, worried about the legal and financial implications of seizing another state’s assets and about the risk that such a move could undermine trust in European financial institutions. Therefore, a quick solution to Ukraine’s acute financing problem via this route is unlikely.

An ever more expensive war

The new request means Europe’s governments are again faced with the question of how long and to what extent they can keep increasing the financing of the war in Ukraine. The EU countries must also weigh support for Kyiv against their own rising defense expenditures and other domestic budget needs.

The large and unexpected deficit thus risks becoming a politically sensitive issue, especially since Europe’s financial responsibility has grown as the US has scaled back its funding. For Ukraine, however, the message is that the cost of the war continues to rise.

“The war has objectively become more expensive,” observes Olena Prokopenko at the think tank German Marshall Fund.