Ukraine Facility’s next chapter: From patchwork to principles

European Commission reports and staff documents on the Ukraine Facility Regulation and Multiannual Financial Framework confirm that the EU’s current ‘crisis response’ approach has led to inconsistencies between internal and external EU policies – from the green transition to the application of international financial institutions’ standards. 

In the next Multiannual Financial Framework, the EU’s financial instrument for Ukraine must be improved by embedding binding climate and environmental safeguards from the outset and preserving funding for democracy, biodiversity, and climate resilience.

Commission lifts lid on Ukraine Facility 

The Commission deserves credit for being candid in its assessment of the Facility’s shortcomings. But recognition must be followed by concrete changes. The Ukraine Reserve represents a once-in-a-generation opportunity – beginning in 2028 – not only to help Ukraine recover from war, but also to anchor its future in democracy, sustainability and EU values.  

In its communication on the 2028–2034 Multiannual Financial Framework, the Commission acknowledges that it treated the Ukraine Facility Regulation as a ‘crisis response-oriented instrument’ designed to absorb the shock of war. Similar to the EU’s other emergency-response instruments, such as the Support to mitigate Unemployment Risks in an Emergency (SURE) and the Health Emergency Response Authority (HERA), the Ukraine Facility Regulation was fast-tracked to deliver urgent funding. 

However, application of this crisis-response strategy has come at the expense of other policy objectives, contributing to what the Commission itself calls a ‘patchwork approach’ to cross-cutting policies, including the green and digital transitions. In its report on the progress towards achieving the objectives of the Regulation, the Commission concedes that the ‘do no significant harm’ principle is applied only ‘to the extent possible’ in wartime, and that the mandatory 20 per cent climate target for the Ukraine Investment Framework will only be assessed at the end of 2027. In this context, the Ukrainian government must develop the necessary tracking systems to ensure reconstruction investments meet evolving sustainability benchmarks.  

Which rules apply? 

In its communication, the Commission also admits that the different rules for internal and external policies have led to ‘double standards’ and a ‘fragmented and overly complex’ financial toolbox. It cites, for example, the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), which operate under different rules depending on whether they are the implementing partners for an internal or an external programme.  

International financial institutions participating in the Ukraine Investment Framework should not apply one set of rules inside the EU and another outside, especially given Ukraine’s status as a candidate country. Harmonised frameworks would enhance legitimacy and ensure a level playing field. 

Accountability and transparency gaps 

This issue is particularly problematic given the current lack of transparency around the Ukraine Investment Framework’s decision-making processes, which remain completely reliant on the policies of international financial institutions. For instance, in cases where urgently needed financing for small and medium-sized enterprises is channelled through Ukrainian financial intermediaries, it is practically impossible to track the final beneficiaries – a gap that must be addressed. 

This lack of transparency is not an isolated issue: our recent monitoring revealed major shortcomings in the environmental and social impact assessment carried out for the EBRD-backed flagship wind power plant in Volyn. Other recent EBRD projects have applied derogations and invoked business confidentiality clauses to justify the late disclosure of information, preventing interested parties from engaging and providing input on potential environmental and social risks.  

The ongoing context of war further limits the extent to which civil society and other stakeholders can engage in public consultations on such projects. According to the Commission’s Ukraine 2025 Report, ‘efforts are needed to set up the legal framework of the partnership principle, requiring the involvement of relevant regional and local authorities, public authorities, socio-economic partners and civil society in all programming stages, preparing the ground for future cohesion policy in line with the European Code of Conduct on Partnership’. 

From Facility to Reserve, but design flaws remain 

This is the backdrop against which the EU is now proposing the Ukraine Reserve – a new instrument of up to EUR 100 billion over seven years from 2028. The Reserve is supposed to finance both Ukraine’s accession process and its long-term reconstruction. Yet there is no sign it will address the structural shortcomings of the Ukraine Facility. Unless designed differently, it risks becoming another reactive, fragmented tool – big on volume but short on accountability, transparency and strategic focus. 

While the Reserve will cover both the accession process and longer-term reconstruction and the ‘full respect of the merit-based process’ stays the underlying principle for providing financial and policy-based support to candidate countries, there are numerous concerns related to the overall design of the instrument, that lacks strong safeguards, democratic oversight, earmarked targets in democracy building, biodiversity and climate-resilient investment principles in the use of these funds.   

The Commission’s new regulation proposal establishing horizontal rules for EU programmes and activities, including those related to Ukraine, sets out provisions linked to horizontal principles such as ‘do no significant harm’. The proposal requires programmes and activities, ‘where feasible and appropriate’, to apply this principle and respect working and employment conditions ‘in line with the principles of economy, efficiency and effectiveness’. 

However, the proposal also allows for exemptions where application of the ‘do no significant harm’ principle may not be feasible or appropriate, citing ‘crisis situations, including emergencies arising from natural catastrophes, or other reasons of overriding public interest’. Given Russia’s ongoing full-scale military aggression against Ukraine, the Reserve will likely fall under this exemption.  

Global Europe’s Ukraine gamble 

Complicating matters, the application of horizontal principles under the Commission’s new proposal for the Global Europe instrument – which tracks EU spending and results in areas such as climate and the environment, social policies, and gender equality – might be affected.   

Under the existing Global Europe instrument, the collective 30 per cent spending target for climate and the environment is calculated across the entire instrument, rather than separately for the Ukraine Facility and the Reform and Growth Facilities for the Western Balkans and Moldova. Moreover, under the new Global Europe instrument, this 30 per cent target may not even be guaranteed. This uncertainty risks undermining the momentum generated by civil society in support of Ukraine’s ‘build back better’ approach and the consistent application of the ‘do no significant harm’ principle in reconstruction projects. 

For the Reserve to be credible and effective, it must include strong safeguards and democratic oversight, supported by mechanisms that ensure genuine and meaningful consultation. These measures are critical for ensuring that EU support not only meets Ukraine’s immediate needs but also strengthens the country’s long-term sustainability and accession process.