The chancellor is throwing his weight behind a new £3bn export finance package aimed at bolstering Ukraine’s military defense against Russia and the country’s future reconstruction.
Sky News has learned that Nadhim Zahawi has told International Trade Secretary Anne-Marie Trevelyan that he supports an application for credit facilities provided by UK Export Finance (UKEF).
In a letter to Ms Trevelyan and copied to the Ministry of Defence, the Foreign Office and 10 Downing Street, Zahawi said he considered it “essential that we continue to support the government of Ukraine in any way we can and demonstrate our faith in the future of Ukraine.”
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A Whitehall source said the chancellor had played an active role in progressing the deal since taking office a few weeks ago.
UKEF’s credit facilities include up to £2.3 billion for financing military contracts identified by the Ukrainian government, with the remaining £700 million for reconstruction projects.
Experts speculated that companies such as BAE Systems and Babcock International were likely to be among those signing individual contracts with UKEF.
According to Zahawi’s letter, which has been seen by Sky News, his support for the deal depends on the resolution of legal issues related to “the compatibility of these facilities with our international subsidy control obligations”.
“Ukraine is clearly a high-risk market in which to do business, and we must recognize that the risk of loss is significant,” he wrote.
“UKEF must also continue to mitigate losses to the Exchequer as far as is reasonably possible.”
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The chancellor added that all individual contracts would also require Treasury approval.
In March, Ms Trevelyan wrote to UKEF chief executive Louis Taylor to instruct the agency to maintain its £3.5bn “market cap” for the country.
Although the £3 billion support is modest in the context of Ukraine’s military and reconstruction needs, it underlines the UK’s central role in providing international support to the country.
A source close to UKEF said it had so far provided £23m in financial guarantees to Ukraine, including support for a commercial shipment of COVID-19 tests to the country’s Ministry of Health before the Russian invasion.
Both the Treasury and UKEF declined to comment on the new credit lines.
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