The European Commission is pushing forward with a high-stakes plan to fund Ukraine's defence with a loan backed by billions in frozen Russian assets, a move that could reshape the financial landscape of the nearly four-year-long conflict.

This financial gambit comes as the war grinds into another winter, with profound economic consequences still rippling across the globe and hitting Kenyan households through high fuel and food prices. The EU's proposal aims to provide a critical lifeline to Kyiv at a time when high-level peace negotiations appear to be making little headway.

A High-Stakes Financial Gamble

European Commission President Ursula von der Leyen announced the plan to provide Ukraine with €90 billion (approx. KES 14.2 trillion), intended to cover two-thirds of Kyiv's funding needs for 2026 and 2027. The primary proposal is a 'reparations loan' secured against some of the estimated €210 billion (approx. KES 33.2 trillion) in Russian central bank assets immobilised in the EU.

"We are sending a very strong message to the Ukrainian people. We are with them for the long haul," von der Leyen stated, emphasizing the move would strengthen Ukraine's position in any future peace talks. However, the plan faces resistance, particularly from Belgium, where the majority of the assets are held, due to legal and financial risks. An alternative option involves the EU borrowing the money on international markets, though this would require unanimous approval from all 27 member states.

Peace Talks Stall as Winter Looms

The EU's focus on financial support comes as a separate track of peace talks led by the United States shows few signs of progress. Recent discussions in Moscow between Russian President Vladimir Putin and envoys for former U.S. President Donald Trump, Jared Kushner and Steve Witkoff, concluded without a significant breakthrough. A top Kremlin aide, Yuri Ushakov, noted that while the five-hour meeting was "constructive," the two sides were "neither further nor closer to resolving the crisis."

These diplomatic deadlocks have a direct impact on Kenya. The protracted conflict has consistently disrupted global supply chains, leading to significant price increases for critical imports. Analysts note the war's effect on the Kenyan economy may have cost up to 2.8% of its GDP in 2022, driven by spikes in the prices of:

• Fuel: Global petroleum prices surged, directly increasing transport and production costs for Kenyan businesses and consumers.
• Fertiliser: Already high fertiliser prices skyrocketed after the invasion, impacting crop yields and food security.
• Wheat: With Russia and Ukraine being major wheat exporters, the disruption hit Kenyan households hard, as bread is a staple food.

As EU leaders prepare to decide on the funding mechanism later this month, the outcome will be closely watched. For Ukraine, it is a matter of survival on the battlefield; for Kenya, it is a question of economic stability and the price of daily bread.