[UKRAINIAN ECONOMY] Euroactiv: How the EU is ruining Ukraine’s economy

The war-torn country is on its knees. Why is Brussels breaking its legs?

Thomas Moller-Nielsen

Source: Euroactiv

May 23, 2025 Donald Trump’s phone call with Vladimir Putin earlier this week – during which the US president promised his Russian counterpart “massive amounts of jobs and wealth” once the war in Ukraine ends – prompted a predictably mealy-mouthed response from European leaders.

“I want to thank President Trump for his tireless efforts to bring a ceasefire to Ukraine,” Ursula von der Leyen wrote on X. “It’s important that the US stays engaged. We will continue to support Volodymyr Zelenskyy to achieve lasting peace in Ukraine.”

There is something profoundly pathetic – deeply disturbing – about the EU's top official thanking a US leader for directly undermining the bloc’s plan to end the most brutal war on European soil in nearly a century. (Just days earlier, von der Leyen had vowed to “keep the pressure high” on Moscow until it agrees to a ceasefire.)

Arguably the most craven part of von der Leyen’s response, however, was her claim that the EU will “continue to support” Kyiv. In fact, through a toxic mixture of action and apathy, the bloc is kneecapping the war-torn country’s economic recovery.

On June 5, Ukraine’s right to export agrifood products duty-free to the EU, introduced shortly after Russia’s full-scale invasion in 2022, will expire.

According to Dmytro Natalukha, chair of the Ukrainian Parliament’s economic affairs committee, the return to the pre-war tariff rate will slash Kyiv’s output by 70% this year, leaving the country just a hair’s breadth away from plunging into recession.

(The EU, meanwhile, admits that the duties will hurt Ukrainian exports but claims that the economic impact won’t be quite as bad.)

Why is Brussels doing this? The reason, unsurprisingly, is politics.

First, the European Commission, which oversees the bloc’s trade policy, has succumbed to pressure from Polish and French farmers who are vehemently opposed to cheap Ukrainian products flooding their markets.

Second, and relatedly, Brussels is worried that an extension of the tariff-free regime could help a right-wing Eurosceptic win Poland’s presidency next month [editor’s note: as happened].

“It looks like the politics inside the European Union is undermining our economic ability to keep up the war effort,” Natalukha told Euractiv during a visit to Brussels.

Natalukha added that, by hurting Ukraine’s agrifood exports, the tariffs also risk decimating one of the two core pillars of Ukraine’s economy.

He also noted that Ukraine’s other pillar, namely its metallurgical sector, could soon vanish if a coal mine near Pokrovsk, a city in Ukraine’s east where fierce fighting is taking place, is eventually captured by Russia’s slowly advancing army.

“This could create an idiotic situation where we will be forced to come and beg you [the EU] for money, instead of simply earning money through trade – which, in my opinion, is a very wicked and twisted situation, because rather than trading and profiting both from the trade in a normal way, Ukraine is being pushed to become a beggar,” Natalukha said.

Tellingly, Natalukha said EU trade officials refused his requests to meet during his visit.

Is silence assent?

Von der Leyen’s comments, however, were also revealing in what they didn’t say.

In particular, her refusal to condemn Trump’s claim that Kyiv could be a “great beneficiary” of US trade only compounds fears that, once the war ends, the EU will stand aside while the Trump administration plunders the country in broad daylight.

One major – and relatively under-reported – illustration of this is Ukraine’s ongoing negotiations with holders of its so-called “GDP warrants”, or bonds that offer payouts linked to economic growth.

The owners of these bonds, which include major US hedge funds Aurelius Capital Management and VR Capital Group and are indexed to Kyiv’s economic performance in 2023, are currently demanding that Kyiv pay out $600 million by the end of this month, on account of the fact that Ukraine’s economy grew by more than 3% two years ago.

Kyiv, understandably, argues that it shouldn’t pay the full amount since its “stellar” growth that year was due to its economy having contracted by almost 30% following Moscow’s invasion in 2022.

Ukraine’s argument is also staunchly supported by debt justice campaigners and independent analysts.

“These warrants were created in 2015 under completely different macroeconomic conditions, which differ fundamentally from today’s realities,” said Bohdan Slutskyi, an economist at the Centre for Economic Strategy, a Kyiv-based think tank.

Tim Jones, policy director at Debt Justice, a UK-based NGO, similarly noted that “the GDP warrants were badly designed... and took no account of the impact of events such as foreign invasions on ow they would work.”

“The European Commission, member states and other allies of Ukraine should be clear that Ukraine will be supported to default on payments on the GDP warrants if bondholders do not accept a reasonable offer,” he added.

When asked to comment on the issue, the Commission refused to back Ukraine’s argument.

“The Commission has been closely following the negotiations between Ukraine and the holders of the so-called GDP warrants and will continue to monitor these exchanges going forward,” a spokesperson told Euractiv.

Translation: We’re not doing anything – and this isn’t going to change.

A critical case

But Brussels’ refusal to support the country while it tries to fend off American firms’ lust for Ukrainian booty is relatively small fry when compared to its silence in the face of an even larger case of legal robbery: namely, the US-Ukraine minerals deal..

Although far better than a previously floated deal, the agreement still forces Ukraine to funnel 50% of future oil, gas, and mineral revenues into an investment fund jointly managed with the US – effectively conceding sovereignty over half of its own natural resources.

Admittedly, some EU officials and diplomats have privately expressed concerns about the deal. Publicly, however, they have repeatedly refused to denounce it, insisting instead that the agreement is a matter for Ukraine and the US to decide among themselves.

Arguably, it’s worse than this. The EU is now actively collaborating on its sanctions policy on Russia with US Senator Lindsey Graham, who openly salivates about Ukraine being a “gold mine” that is “sitting on" trillions of dollars' worth of minerals that would be "good to our [i.e. the American] economy".

None of this is to deny, of course, that the EU has provided enormous amounts of support to Ukraine since the start of the war.

But this doesn’t mean that this support will continue. In particular, it doesn’t mean that the EU will, as officials frequently claim, support Ukraine “for as long as it takes”.

In reality, the EU will support Ukraine for as long as it wants to – which is to say, as long as it finds it politically expedient.