The European Union has cleared the path for a €90 billion loan to Ukraine after Hungary lifted its veto, but remains divided and largely inactive on the escalating economic fallout from the Iran conflict, which costs the bloc an estimated €500 million per day.
At the EU summit in Cyprus, Commission President Ursula von der Leyen declared the union stronger and more united following the removal of Viktor Orbán as a blocking force, citing the immediate disbursement of the long-stalled Ukraine funding as proof. The loan, initially agreed in December, had been held up by Hungary over disputes concerning oil transit through Ukraine’s Druzhba pipeline, which Kyiv says it has now repaired and returned to operation.
Ukrainian President Volodymyr Zelenskyy confirmed the pipeline’s repair via social media, stating that Russian oil flows to Slovakia and Hungary have been halted as a result. He accused Russia of causing the January damage, a claim disputed by both neighboring countries, which have halted diesel supplies to Ukraine and demanded an independent inspection. Hungary had previously tied its veto lift to the resumption of Russian oil flows through the repaired pipeline.
Zelenskyy said he spoke directly with von der Leyen and European Council President António Costa, emphasizing that Ukraine had met all conditions for the funds and urgently needed the money to sustain its defense against Russia’s invasion. He framed the loan as beneficial not only for Ukraine but for all of Europe.
Despite the progress on Ukraine funding, the EU remains hampered by its limited capacity to act on the Iran conflict. Western sanctions on Iran remain in place, but the bloc is now seeking to expand them to include entities disrupting freedom of navigation in the Strait of Hormuz, a vital chokepoint for global oil shipments. Foreign policy chief Kaja Kallas stated the EU is politically united on the need to penalize interference with commercial shipping, though military involvement in the conflict remains ruled out by member states.
Instead, the EU is discussing a potential joint naval mission focused on mine clearance and surveillance to protect energy and cargo shipments, should conditions allow. German Chancellor Friedrich Merz indicated Germany could contribute in those specific areas and would continue participating in military planning talks.
The European Commission estimates the Iran conflict is imposing direct costs of around €500 million daily on European economies, with risks of prolonged energy price increases. Von der Leyen urged greater coordination among member states to reduce expenses, proposing EU-wide alignment of gas storage and refilling schedules to prevent market competition that drives up prices. She also suggested optimizing the distribution of aviation fuel between states to avoid summer shortages and flight disruptions.
While the Ukraine funding breakthrough marks a symbolic and procedural victory for EU cohesion, the bloc’s inability to formulate a unified response to the economic strain from the Iran conflict underscores the limits of its current foreign and security policy framework. The contrast between decisive financial action on Ukraine and continued hesitation on Iran reflects differing threat perceptions and national interests among member states.
Why did Hungary initially block the €90 billion loan to Ukraine?
Hungary blocked the loan due to disputes over the transit of Russian oil through Ukraine’s Druzhba pipeline, which it wanted restored as a condition for lifting its veto, citing energy security concerns for its domestic supply.
What specific actions is the EU considering to address navigation risks in the Strait of Hormuz?
The EU is considering expanding sanctions to target entities that interfere with freedom of navigation in the Strait of Hormuz and is discussing a potential joint naval mission focused on mine clearance and maritime surveillance to protect shipping lanes, should security conditions allow.
