EU's Ukraine Aid Fractures as Hungary Blocks €90 Billion Package

The European Union's unified front on Ukraine faces a critical fracture as Hungary deploys its veto power to block both a 90-billion-euro lifeline and the bloc's 20th sanctions package against Russia—all while the war enters its fifth year and leaders from across Northern and Baltic Europe converge on Kyiv to reaffirm military support.

Why This Matters:

• Hungary's veto jeopardizes €90B in critical military and budget aid that Ukraine needs by April to avoid fiscal collapse.

• The 20th EU sanctions package targeting Russia's "ghost fleet" and energy revenues remains frozen, undermining bloc unity.

• Energy blackmail tactics escalate: Slovakia cut electricity exports to Ukraine; Hungary threatens to torpedo Ukraine's EU accession talks.

• Nordic-Baltic coalition of 8 leaders plus EU chiefs Costa and von der Leyen gather in Kyiv for coordinated security guarantees—without US presence.

Orbán's Ultimatum Shakes EU Cohesion

Portugal's former prime minister António Costa, now serving as President of the European Council, issued a rare public rebuke to Hungarian Prime Minister Viktor Orbán, warning that his refusal to honor a December 2024 agreement "constitutes a violation of the principle of loyal cooperation" among EU member states. In a letter obtained by Portuguese news agency Lusa, Costa urged Orbán "vehemently" to unblock the €90B loan package that 24 member states had already endorsed.

The Hungarian premier has tied his veto to a single issue: the Druzhba oil pipeline, which once carried Russian crude through Ukraine to landlocked Hungary and Slovakia. Since late January, flows have been interrupted. Kyiv blames Russian drone strikes that damaged pumping infrastructure on January 27; Budapest and Bratislava accuse Ukraine of deliberate "energy blackmail" to force policy concessions. Intelligence data cited by Slovak Prime Minister Robert Fico claims repairs are complete and that Ukraine is stalling for political leverage.

Hungary's blockade carries cascading consequences. The €90B facility—€60B for military hardware and defense industry investment, €30B for public administration—was structured as joint EU debt backed by the bloc's budget. Without it, a parallel €8B International Monetary Fund program also collapses, since the IMF made its support conditional on EU backing. Ukraine's finance ministry projects a budget shortfall in April, threatening pension payments and critical services.

Slovakia Retaliates with Power Cut

Slovakia escalated the energy standoff by suspending emergency electricity exports to Ukraine. In a Facebook video message, Fico announced the immediate cut and threatened to "reconsider our previously constructive position on Ukraine's EU accession" if Kyiv does not restore oil transit. The move marks the first time a NATO and EU member has weaponized energy supplies against Ukraine since the full-scale invasion began.

Hungary followed suit, halting diesel exports to Ukraine and preparing additional "reciprocal measures." Foreign Minister Péter Szijjártó clashed with Ukrainian journalists in Brussels, accusing them of bias and repeating claims that President Volodymyr Zelensky orchestrated an "oil blockade" to coerce Hungary. The European Commission, for its part, stated it would not pressure Ukraine to resume transit of Russian crude—a product still exempted from EU sanctions for Hungary and Slovakia under a temporary carve-out negotiated in 2022.

Nordic-Baltic Show of Force in Kyiv

While the Orbán-Costa confrontation played out via diplomatic cables, eight leaders from Northern Europe arrived in the Ukrainian capital in a coordinated display of unity. Danish Prime Minister Mette Frederiksen, Swedish PM Ulf Kristersson, Finnish President Alexander Stubb, Estonian PM Kristen Michal, Icelandic PM Kristrún Frostadóttir, Latvian PM Evika Silina, Norwegian PM Jonas Gahr Støre, and Lithuanian Defense Minister Robertas Kaunas joined Ursula von der Leyen and António Costa for a day of high-level consultations with Zelensky.

The agenda focused on three pillars: sustained military aid, tougher Russian sanctions, and the emerging framework of European security guarantees that would underpin any eventual ceasefire. The group will participate via video link in a virtual summit convened by French President Emmanuel Macron and UK Prime Minister Keir Starmer—the so-called "Coalition of the Willing," comprising 35 nations committed to arming Ukraine and providing post-conflict security architecture. Notably, no US delegation is scheduled to attend, a sharp contrast to the coalition's inaugural meeting in Paris on January 6.

Frederiksen emphasized that "Europe must continue working to place Ukraine in the strongest possible negotiating position," which requires weapons deliveries and harsher sanctions on Russia. Swedish leader Kristersson observed that the war has now lasted "as long as the Second World War" for Sweden's strategic calculus, underscoring why continued support "will influence Sweden's security for a generation."

Estonian PM Michal made an emotional connection: Russia launched its full invasion on Estonia's Independence Day—February 24. "We know how precious freedom is, and we will do everything in our power to help Ukraine achieve a just and lasting peace," he declared.

What This Means for EU Credibility

The diplomatic theater in Kyiv contrasts starkly with the procedural deadlock in Brussels. EU foreign ministers gathered on the same day to approve the 20th sanctions round—designed to target Russia's "ghost fleet" of aging tankers that evade sanctions, plus further restrictions on energy revenues. High Representative Kaja Kallas acknowledged before the meeting that "there will be no progress on this matter today" due to Hungary's veto, though she vowed to "insist on this issue."

Kallas emphasized the disconnect between Budapest's justification—the Druzhba pipeline—and the substance of the sanctions package. "I don't think we should link things that have nothing to do with each other," she told reporters, adding that the EU would "listen to their explanations" and seek workarounds. Yet the failure to impose new penalties on the eve of the war's fourth anniversary sends an unintended signal of disunity to both Moscow and Kyiv.

Since Russia's invasion began on February 24, 2022, the EU has mobilized €194.9B in total support: €104.5B in humanitarian and budget aid, €69.7B in military assistance, €17B for refugee support within EU borders, and €3.7B derived from frozen Russian state assets. That financial firepower dwarfs contributions from any other bloc, making Europe Ukraine's primary backer in absolute terms—yet Hungary's repeated vetoes illustrate the fragility of consensus-based governance when a single capital holds blocking power.

Impact on Expats & Investors

For Portugal-based professionals monitoring geopolitical risk, the unfolding crisis carries several implications:

Energy Security Models: The Druzhba dispute exposes the vulnerability of landlocked EU states still dependent on Russian hydrocarbons. While Portugal sources zero oil via Russian pipelines, the precedent of member states weaponizing energy transit against a candidate country could complicate future EU accession processes and strain cohesion.

EU Bond Markets: The proposed €90B Ukraine loan was structured as joint EU debt, similar to the pandemic-era recovery fund. A failure to deliver on a commitment already endorsed by heads of state risks undermining confidence in EU sovereign guarantees, with potential spillover effects on borrowing costs for peripheral economies including Portugal.

Defense Industry Opportunities: The Nordic-Baltic coalition's emphasis on arming Ukraine translates to sustained demand for European defense contractors. Portuguese firms in aerospace, cybersecurity, and dual-use technology sectors may find procurement opportunities as Brussels seeks to diversify supply chains away from US dependence.

Migration Pressures: Should Ukraine face a fiscal collapse in April, resulting in pension and salary payment failures, a fresh wave of westward migration could materialize. Portugal already hosts approximately 60,000 Ukrainian refugees under temporary protection status; any deterioration in Ukraine's domestic stability would likely increase that figure.

Macron-Starmer Coalition Charts Post-Conflict Architecture

The virtual summit convened by Paris and London represents Europe's most concrete attempt to define security guarantees outside the NATO framework. According to French officials, the coalition is building a three-tier structure: first, a strengthened Ukrainian military as the primary deterrent; second, direct European involvement in protecting Ukrainian airspace, maritime zones, and land borders; third, US backing to respond to any resumption of hostilities after a ceasefire.

French Foreign Minister Jean-Noël Barrot defended France's maintenance of diplomatic channels with Moscow, telling France Inter radio that "it is normal for Europe to have an independent contact channel with Russia" given the bloc's status as Ukraine's leading financial and military supporter. Barrot confirmed that contacts between diplomats continue, though he declined to verify reports of a meeting between Emmanuel Macron's top adviser, Emmanuel Bonne, and his Russian counterpart, Yuri Ushakov, in Moscow last week.

Barrot's comments sparked criticism from Baltic and Polish officials, who argue that dialogue with the Kremlin should occur only with full Ukrainian consent and transparency. Yet France insists such contacts are necessary to manage escalation risks and prepare the ground for eventual negotiations—a stance that reflects Europe's strategic autonomy dilemma as US engagement under the Trump administration remains unpredictable.

Zelensky: "Putin Has Already Started World War III"

In an interview with the BBC released on the eve of the anniversary, President Zelensky framed the conflict in existential terms. "I think Putin has already started [World War III]. The question is how much territory he will manage to seize and how to stop him," he said. "Russia wants to impose a different way of life on the world and change the life people have chosen."

Zelensky reiterated his refusal to cede 20% of Donetsk Oblast, plus strategic territories in Kherson and Zaporizhzhia, as the price for a ceasefire—the core demand Putin has publicly articulated. "Russia started this war, and stopping Putin is a victory for the entire world," the Ukrainian leader insisted, pushing back against Western voices urging territorial compromise.

Pope Leo XIV, speaking after Sunday prayers at the Vatican, issued a renewed appeal for an immediate ceasefire. "How many victims, how many shattered lives and families, how much destruction, how much indescribable suffering!" the pontiff said. "Every war is truly a wound inflicted on the entire human family." The Pope urged parties to "cease bombardments without delay" and open pathways to dialogue, calling peace an "urgent necessity that cannot be postponed."

German Chancellor Merz Heads to Beijing

In a parallel diplomatic track, newly inaugurated German Chancellor Friedrich Merz will visit Beijing on Wednesday and Thursday for talks with President Xi Jinping and Premier Li Qiang. Chinese Foreign Ministry spokesperson Mao Ning confirmed that the Ukraine war will be on the agenda, but insisted that "Ukraine should not become an issue between China and Europe."

Mao reiterated Beijing's claim to an "objective and impartial position" on the conflict, supporting a diplomatic solution while stressing that China "is not a party to the Ukraine question." Germany remains China's largest European trading partner, with €251.8B in bilateral trade in 2025, and Merz will be accompanied by a business delegation seeking to stabilize commercial ties amid rising geopolitical friction.

The visit follows a series of Western leaders traveling to Beijing—including the prime ministers of Spain, France, Canada, Ireland, the UK, and Portugal's Luís Montenegro—as European capitals attempt to maintain economic engagement with China while managing strategic competition and divergent views on Russia's war.

Navigating the Fifth Year

As the conflict enters its fifth year, the strategic landscape is defined by grinding attrition on the battlefield and deepening fractures within the Western coalition. Ukraine's military remains dependent on sustained weapons deliveries from Europe, while Russia leverages energy dependencies and exploits divisions among EU capitals. Hungary and Slovakia, the only member states still significantly reliant on Russian oil via the Druzhba pipeline, have become blocking minorities on critical decisions, forcing Brussels to explore procedural workarounds such as qualified majority voting or the use of frozen Russian assets outside the EU budget framework.

For Portugal and other peripheral EU economies, the lesson is clear: Europe's capacity to project power and enforce collective decisions hinges on overcoming the unanimity trap. Whether through treaty reforms, creative financing mechanisms, or diplomatic pressure, the bloc must reconcile its ambition to serve as Ukraine's primary guarantor with the reality that a single capital—Budapest—can paralyze decision-making at the most critical junctures.

The convergence of Nordic, Baltic, and EU leadership in Kyiv signals resolve at the political level. Whether that translates into deliverable military aid, enforceable sanctions, and credible security guarantees will determine not only Ukraine's fate but also Europe's ability to defend the rules-based order that underpins its own prosperity and security.