European Peace Facility on the Warpath

Written by Anton Khimiak, analyst – Hybrid Warfare Analytical Group/UCMC

On March 18, the EU Foreign Affairs Council agreed to provide an additional €5 billion in military assistance to Ukraine. This amount is set aside for Ukraine’s defense needs in the form of a Special Assistance Fund for Ukraine under the European Peace Facility (EPF).

Since 2022, the EU has provided military assistance to Kyiv via the EFP. The fund’s activities also seek to compensate member states for the costs of weapons provided to Ukraine. The EPF’s work has, on occasion, been hampered. First, funding was provided in tranches, which individual member states could block. Hungary frequently exercised this right, refusing to approve the EPF’s replenishment for a variety of reasons. Second, until recently, Western European countries discussed the feasibility of purchasing weapons outside the EU, which slowed the flow of military aid to Ukraine.

Ultimately, the joint European military assistance failed to meet its commitments for 2023. This was particularly evident in the case of the one million artillery munitions, with only about one-third of the pledged amount delivered by the end of 2023.

As a result, the purpose of this article is to examine the effectiveness of the European Peace Fund in strengthening Ukraine’s defense capabilities and European security during Russia’s large-scale aggression over the last two years. We will also attempt to identify areas for improvement and make recommendations on how to enhance the support system.

What exactly is the role of the European Peace Facility?

The European Peace Facility is an extra-budgetary mechanism established by the Common Foreign and Security Policy to fund the EU’s military and defence needs. The fund is financed separately from the EU budget, and each country’s contribution is limited to an annual amount. Thus, medium-term budgetary planning determines how much money will be required and how much states will be able to spend on the implementation of the CFSP. 

Until February 24, 2022, the majority of the fund’s expenditures were directed toward African and Middle Eastern countries. These were primarily expenditures for cybersecurity, medical care, and other non-lethal equipment aimed at improving third-country security capacity. For example, EPF programmes provided funding to the armed forces of Moldova, Bosnia and Herzegovina, Jordan, and Mozambique. EUR 600 million has been allocated to the African Union’s general support programme for 2022–2024.

The full list is available here.

Amount of aid for Ukraine

Since the outbreak of Russia’s full-scale war against Ukraine, the majority of funds have been directed toward Ukraine’s needs. Since then, the fund has undergone several transformations. At the end of 2022, the EU Council increased the fund’s 2023 allocation by €2 billion. In June 2023, funding was increased by another €3.5 billion.

It became clear that these funds would not be sufficient to meet Ukraine’s security needs. As a result, in the autumn of 2023, some EU member states began calling for new injections of funds into the EPF. Representatives from Poland, in particular, insisted on a €20 billion increase in the fund to cover all potential additional costs.

As of October 2023, the fund had allocated approximately €6 billion to assist Ukraine. It is important to note that the majority of these funds were not directly used to purchase weapons and military equipment, but were often used to “compensate” the arsenals of European armies that had moved Cold War-era weapons stockpiles to Ukraine. 

Headline: “Europe is desperate for ammunition” – Spiegel

The EPF also set aside approximately €2 billion for production modernisation. The Ammunition Support Act (ASAP), approved by EU member states in May 2023, governs the allocation of funds. It provides assistance to EU countries in replenishing their defense stockpiles, as well as the immediate delivery of ammunition and missiles to Ukraine. By the end of 2025, Europe is expected to produce 2 million ammunition units per year.

In terms of additional funding for initiatives aimed at strengthening Ukraine’s defense capabilities, the European Commission presented a draft decision on the use of proceeds from frozen Russian assets on March 20, which should provide between €2.5 and €3 billion annually for Ukraine’s armaments. According to the proposal, 90% of the proceeds from Russian assets frozen in Europe can be used to buy weapons for Ukraine via the European Peace Facility. The remaining 10% would be used to expand Ukraine’s defense industry.

It is important to note that the EFP is not the only tool for improving European security and providing military assistance to Ukraine. The European Commission launched a programme to strengthen the European defence industry through common procurement (EDIRPA) in autumn 2023, as well as the European Defence Fund’s fourth annual work programme. The total budget for these programmes is nearly €2 billion.  

Furthermore, on March 5, this year, the European Commission unveiled the European Defence Industry Strategy for the first time. It includes the European Defence Industry Development Programme for 2025–2027. The programme will be funded with €1.5 billion. 

The Apple of Discord

The approved $5 billion for the Ukraine Assistance Fund is intended to be part of a $20 billion package over four years. However, in recent months, we have seen discussions among European countries about how to avoid being “left behind”.

There have been reports that Germany is attempting to reduce its obligations under the EPF. According to a report in The Telegraph: “In a confidential ‘non-paper’, Berlin argues that the European Peace Facility  (EPF) should take into account the billions in military aid it (Berlin) has provided to Kyiv on a bilateral basis.” In practice, this would mean that Berlin, the EU’s largest donor of military aid to Ukraine, would make no contributions to the EPF, jeopardising the fund’s replenishment and, as a result, the supply of weapons to Kyiv.

Germany eventually agreed to a compromise, which included a 50% reduction in Berlin’s contributions.

France, on the other hand, argues that European funds should be used to strengthen the EU’s military-industrial complex. Poland, the Czech Republic, and the Baltic states, on the other hand, have publicly insisted on the need to meet Ukraine’s needs as soon as possible.

“EU countries are arguing about the manufacturers from whom they plan to buy 1 million shells for the Armed Forces” – Militarnyi

On the other hand, some countries have been accused of using funds allocated to Ukraine to modernize their own armies while sending Ukraine’s Armed Forces outdated, inefficient, and poorly maintained equipment.

All of this could severely limit the EU’s ability to continue supporting Kyiv, exacerbating the situation in light of uncertainty about US assistance.

However, by the end of March 2024, there had been positive developments. French President Emmanuel Macron stated that he was willing to support the Czech Republic’s initiative to purchase shells from third countries. Josep Borrell, the chief diplomat of the EU, said: “…any member state that wants to buy ammunition outside the European Union, has an offer, or knows where to buy it, can do so and receive a legitimate reimbursement from the European Peace Facility .”

It is also worth noting that, according to the decision, the European Peace Facilitie’s financial ceiling for the period 2021–2027 will exceed €17 billion.

Over the last two years, the European Peace Facility has played an important role in bolstering Ukraine’s defense and European security. However, the key EU military assistance mechanism could be more efficient, adaptable, and coordinated.

It is critical that, at this stage, disputes between EU capitals do not undermine the effectiveness of the Ukraine Assistance Fund due to decision-making delays. That is why the EU should look into ways to expand the types of assistance that can provide the necessary compromise among member states. For example, the fund could assist states in financing projects carried out directly in Ukraine, such as additional funding or insurance for the Rheinmetall plant’s construction.

After all, transparency and accountability are vital for effective aid delivery. Additional monitoring mechanisms can improve accountability and ensure that resources are used effectively and for their intended purposes.