When the United States officially halted military aid and intelligence sharing with Ukraine last week, it sent shockwaves through Kyiv’s leadership.
And when leaders from both countries issued a joint statement on Tuesday, saying that both military aid and intelligence sharing had “immediately” been reinstated after state representatives held bilateral talks in Saudi Arabia, there was a collective sigh of relief in much of Ukraine.
JOIN US ON TELEGRAM
Follow our coverage of the war on the @Kyivpost_official.
“America and Americans were perceived as trustworthy partners. But now, that is no longer the case,” the director of a company that worked as a USAID contractor previously told Kyiv Post after the White House quickly moved to shutter the global aid relief agency and lay off thousands of workers with little notice in one of Trump’s first major acts in office.
But can Ukraine count on the US to continue providing support, or may the White House decide to punitively cut it again if negotiations between Washington, Kyiv, and Moscow don’t go smoothly? And what options does Ukraine have to fill any gaps in support left by a potentially reticent White House?
Kyiv is not taking any chances.
Political analysts and government officials had warned for months that Washington’s support to Ukraine was not guaranteed – particularly after US President Donald Trump took office. Even before Washington’s aid freeze, Kyiv already put into place several precautionary economic measures in anticipation of potential disruptions from the country’s largest backer.
Did the US Collaborate with Russia for the Recovery of Kursk Oblast?
As a result, Ukraine isn’t facing an immediate economic crisis despite the ongoing uncertainty over Western assistance. On the contrary, Ukraine has already secured enough external funding sources to cover social spending and essential government services for 2025.
The EU has played a critical role as an alternative financial partner alongside the US since mid-2022, and most EU leaders have continuously supported Ukraine since then. While American aid was disbursed rapidly to cover emergency needs – often with minimal bureaucratic hurdles – the EU took a more measured approach.
“The EU, understanding the risks of US support as early as last year, made a decision that will help offset a potential financial gap,” said Oleksandra Betliy, an analyst at the Institute for Economic Research and Policy Consulting (IER), told Kyiv Post.
Its macro-financial assistance required coordination among member states, making the process slower, but it was strategically designed for mid-term economic stabilization rather than short-term relief.
But the real challenge goes beyond balancing the state budget and negotiating with partners – Ukraine still needs to sustain its military efforts against Russia as Ukrainian President Volodymyr Zelensky and Trump continue to hash out a peace deal with Russian leader Vladimir Putin.
So how much funding has Ukraine secured from other partners? And will it be enough to cover Ukraine’s needs beyond this year if the Trump administration again halts aid before Kyiv accepts a peace agreement?
Three replacements for American aid in Ukraine
While the sudden disruption of US military aid and intelligence-sharing earlier this week raised serious concerns, Kyiv had already secured significant financial support from other partners.
The three primary sources of alternative funding include:
- The Extraordinary Revenue Acceleration (ERA) loan, backed by profits from frozen Russian assets
- Support from the European Union (EU) and International Monetary Fund (IMF)
- Tax revenue and government bonds purchased domestically
These funding mechanisms were set up to provide stability in case of financial shortfalls – like a sudden halt of any significant funding source – ensuring that Ukraine’s government operations, military expenses, and reconstruction efforts could weather any storm that might come its way.
The ERA loan: Frozen Russian assets repurposed for Ukraine
A crucial component of Ukraine’s 2025 financial strategy is the Extraordinary Revenue Acceleration (ERA) loan, which is backed by profits generated from frozen Russian assets held in Europe.
The idea behind the program is simple – it redirects interest earnings from Russia’s immobilized assets toward Ukraine to compensate for the destruction caused by the war. The ERA loan provides $50 billion in financial assistance that Ukraine will not have to repay, a significant relief for the country’s struggling economy.
This initiative was negotiated between Ukraine, the EU, the US, Canada, Japan, and the UK, with joint agreements signed in late 2024. These countries remain the ERA’s major stakeholders.
“It is critically important for us to receive contributions from all partners to the ERA support mechanism,” Betliy told Kyiv Post.
The total amount of frozen Russian sovereign assets is estimated to be between $210 billion and $320 billion, with $191 billion locked in the Euroclear financial clearing house in Brussels. In February 2024, Euroclear reported that $4.75 billion in interest had already been generated by the funds, according to The Guardian.
The EU Parliament confirmed that $227 billion in Russian central bank assets remain frozen under sanctions imposed since Russia’s full-scale invasion in February 2022.
So far, the US has contributed $20 billion to the ERA, with the first $1 billion tranche transferred on Christmas Eve 2024, according to Ukraine’s Ministry of Finance.
The EU’s contribution amounts up to €35 billion ($37.84 billion), and Ukraine already received the first tranche of €3 billion ($3.09 billion) in January this year.
Chancellor of the Exchequer Rachel Reeves announced Britain’s $3 billion commitment to Ukraine in a statement on March 1. “This new money is in Britain’s national interest because the frontline of our defense – the defense of our democracy and shared values – is in the Ukrainian trenches,” he said. “A safe and secure Ukraine is a safe and secure United Kingdom.”
Canada disbursed nearly $1.7 billion to Ukraine in March, 13.
Japan announced its $3.08 billion contribution last year, but hasn’t disbursed money at the moment of writing this article. Tokyo will sign the agreement that will enable allocating the tranche in the “near-term future,” a source in Ukraine’s Ministry of Finance told Kyiv Post.
The future use of Russia’s frozen assets remains uncertain, as European leaders have hesitated to fully confiscate the funds for Ukraine’s reconstruction or military needs. While there is growing support for using the profits generated by these assets, outright seizure of the principal remains a contentious issue.
A Kyiv Post source in Ukraine’s government said in summer 2024 that Germany has been one of the key opponents of full confiscation, fearing that such a move could trigger legal challenges from Moscow in international courts over the violation of sovereign asset protections.
Meanwhile, Saudi Arabia allegedly warned G7 nations that it could retaliate by selling off Eurobonds and French bonds if the group moved forward with seizing all of Russia’s frozen assets for Ukraine’s defense and reconstruction.
A source familiar with the matter described the warning as a veiled threat, though the Saudi finance ministry has denied making any such statement. This geopolitical balancing act may have contributed to Europe’s cautious approach, with leaders avoiding open discussions on whether to confiscate the full sum of Russian assets.
Some governments fear potential legal repercussions from Russia in international courts, while others – such as French President Emmanuel Macron – have floated the idea of using $200 billion of frozen Russian assets as part of negotiations to end the war.
European and IMF support: A crucial financial lifeline
In addition to the ERA loan, Ukraine has secured extensive financial backing from the EU and IMF.
The EU, understanding the risks of US support as early as last year, made a decision that will help offset a potential financial gap - Oleksandra Betliy, analyst at the Institute for Economic Research and Policy Consulting
In 2024, Ukraine’s total external financing reached $41 billion, with major contributions from 11 international donors. The EU and IMF emerged as two of the largest financial backers, working to ensure Ukraine’s economic stability while also setting conditions for long-term financial sustainability.
The EU provided $14 billion in loans and $3.2 billion in grants, primarily through its Ukraine Facility financing program. However, unlike US grants, most European contributions require eventual repayment – a factor that increases Ukraine’s long-term financial obligations.
The IMF has also played a pivotal role, offering $15.5 billion through an Extended Fund Facility (EFF) program to support Ukraine. By the end of 2024, Ukraine had already received $9.8 billion, with an additional $2.7 billion scheduled for 2025, according to a statement by Prime Minister Denys Shmyhal.
This financing is contingent on Ukraine implementing key economic and anti-corruption reforms – a requirement that could influence the pace and reliability of future disbursements.
“The EU, understanding the risks of US support as early as last year, made a decision that will help offset a potential financial gap,” Betliy said.
Less than a week after the Oval Office clash between Trump and Zelensky, several EU countries announced additional financial and military aid packages to Ukraine.
Previously, EU chief Ursula von der Leyen presented a five-part plan to mobilize some €800 billion ($870.3 billion) for Europe’s defence – and help provide “immediate” military support for Ukraine after Washington suspended aid.
“‘ReArm Europe’ could mobilize close to €800 billion of defence expenditures for a safe and resilient Europe,” she told reporters in Brussels on March, 4. And during a meeting with Zelensky last week, European leaders backed even more plans to increase spending on defense.
Meanwhile, the EU parliament reported that €210 billion ($227.01 billion) in assets from the Central Bank of Russia are being held in the union and “remain frozen under sanctions imposed over Moscow’s invasion of Ukraine in February 2022.”
Apart from Europe’s part in the ERA loan and additional fresh packages of direct aid, Europe and Ukraine are committed to the Ukraine Facility – the European Union’s financial assistance programme for Ukraine.
During the period of 2024-2027, the EU has already promised Ukraine €50 billion ($54.3 billion) in funding through the Ukraine Facility program for the state budget, private investment, and technical assistance. In return, Ukraine must implement economic reforms.
If Kyiv fails to reform the country, it will face lower tranches, European audits, and strict control of the transactions from the EU.
Another challenge is to create regulations that will help the private defense sector flourish, fueling both Ukraine’s defense efforts and providing taxes to the state budget.
“The government should refrain from populist programs and increase defense funding. It is crucial today to secure longer-term contracts with Ukrainian arms manufacturers,” Betliy told Kyiv Post. “Defense manufacturers create jobs, pay taxes in Ukraine, and are therefore not only essential for the sustainability of the defense sector but also for the economy.”
The increased demand for the military enlarged the share of public administration and defense sector in Ukraine’s GDP from 6% to 22%, National Bank of Ukraine Deputy Governor Sergiy Nikolaychuk exclusively told Kyiv Post. Military needs fueled industrial machinery manufacturing, drone production, textile work, and the food industry, he said.
One constant hurdle remains: while the EU’s financial assistance was designed as mid-term economic stabilization, Ukraine’s war effort still requires immediate cash flow for military expenditures – something European institutions have been less willing to directly finance so far.
Domestic tax revenue and government bonds: A major self-sustaining effort
While international funding remains essential, Ukraine itself has become one of its largest financial backers.
In 2024, Ukraine’s state budget was bolstered by $15.6 billion in domestic government bonds, making Ukrainians the second-largest contributors to their own war effort.
These bonds, purchased by Ukrainian financial institutions, businesses, and individual citizens, have provided a critical financial buffer since the beginning of the war. The total volume of bonds purchased has exceeded one trillion hryvnias since the full-scale invasion began.
However, government bonds are costly for Ukraine – interest rates comprise 16% on average according to the National Bank of Ukraine data, making them the most expensive source of investment compared to international loans.
“Although this tool is expensive, it’s a major part of the financial cushion for the country,” a second source from the Ukrainian Ministry of Finance told Kyiv Post to explain the significance of domestic bonds, despite their high cost. “You can see on the graph how important that is.”
Tax revenue remains another major source of domestic funding. However, given Ukraine’s wartime economy and the displacement of millions, internal revenue alone cannot fully sustain the budget, particularly military expenses.
Ukraine’s economy has been completely reshaped by war and cannot revert back to a peace-time economy quickly – restricting financial tools that might otherwise be available.
“But while the full-scale war continues, returning to ‘peacetime’ indicators, with pre-war debt level and budget deficit, is absolutely impossible,” the Minister of Finance Serhiy Marchenko told Kyiv Post during his press briefing in November.
Even if Ukraine agrees to a ceasefire that guarantees a stable peace, Ukraine’s economy needs time to recover from the stress caused by the full-scale war.
“For the necessary macro-financial conditions to fully materialize, it is most likely that we will need to rely on a just and lasting peace,” Nikolaychuk told Kyiv Post. “Security risks and their reduction will also be gradual: there won’t be an immediate switch from one mode to another.”
Can these alternatives replace US aid to Ukraine?
Ukraine has successfully built a diversified financial safety net to sustain its economy, but when it comes to military aid and intelligence-sharing, no alternative fully replaces US support.
European loans, IMF programs, and domestic bonds ensure Kyiv can cover social spending, government operations, and long-term economic stability. But when it comes to immediate war-related expenses – like purchasing weapons, producing drones, and supplying troops – Ukraine still heavily relies on Washington’s backing.
“The government should refrain from populist programs and increase defense funding,” Oleksandra Betliy, an analyst at the Institute for Economic Research and Policy Consulting (IER), told Kyiv Post, emphasizing that securing long-term contracts with domestic arms manufacturers is now more critical than ever.
“Defense manufacturers create jobs, pay taxes in Ukraine, and are therefore not only essential for the sustainability of the defense sector but also for the economy,” she added.
While European nations have stepped up economic support, many Western allies remain hesitant to provide Ukraine with the same level of direct military assistance that Washington did before Trump’s aid freeze. Despite recent EU defense initiatives, Europe remains cautious about directly financing Ukraine’s armed forces at the scale required for sustained resistance against Russia.
Ukraine’s ability to maintain its war effort now depends on two key factors: Whether European allies will increase military-specific aid to compensate for potential US shortfalls, and how effectively Ukraine can expand its domestic defense industry to become more self-reliant.
If Washington cuts assistance again, Kyiv will have no choice but to rely more heavily on European defense programs and its own rapidly growing military-industrial complex – a sector that has already expanded its impact on the GDP by more than three times, according to the National Bank of Ukraine.
“Defending against Russia’s war is resource-intensive and will not allow a return to the low level of debt Ukraine’s GDP had before the full-scale invasion or [for Ukraine to] become less dependent on foreign aid,” Ukrainian Finance Minister Serhiy Marchenko told Kyiv Post in a November press briefing.
The ERA loan and IMF and EU support will provide a robust financial buffer for Ukraine, but they are not a replacement for the scale of military funding previously provided by the US.
A difficult road ahead
Ukraine’s financial strategy has provided crucial stability for 2025, but the long-term war effort still hinges on the need to finance an economy that almost doubled in size at the start of the full-scale invasion.
If Western allies in Europe and elsewhere do not step up their commitment to direct defense support to Kyiv, Ukraine will have to fight an increasingly difficult war to sustain both its economy and its very existence.
As the Trump administration continues negotiations with Kyiv and Moscow, the biggest uncertainty remains whether US support will remain stable – or if Ukraine will once again face a sudden freeze in funding and military cooperation.
With growing financial commitments from Europe and Ukraine’s expanding domestic defense sector, Kyiv has a fighting chance to withstand future disruptions. And recent polls show that the Ukrainian population is willing to keep fighting until a just and lasting peace can be negotiated.
But in a war that still shows no signs of ending, the question remains whether Western allies are willing to make up for the military gap left by Washington’s wavering support.
You can also highlight the text and press Ctrl + Enter
