BRUSSELS ― The rising popularity of U.S. presidential candidate Kamala Harris has thrown an unexpected diplomatic wrench into efforts by Europe and Washington to give Ukraine a $50 billion loan.

Before President Joe Biden pulled out of the race for the White House, the prospect of a Donald Trump presidency had spurred diplomats on both sides of the Atlantic to set aside differences in order to finalize the loan by the end of the year.

But the prospect of a Harris victory has removed some of the urgency from that drive. While officials feared Trump would unravel the loan agreement and slash aid to the war-torn country, they believe the Democratic candidate is unlikely to do any such thing, and that she actually has a chance of winning the presidency.

As a result, a split between the EU and the U.S. over the finer points of the loan ― which would be repaid using the profits from investing frozen Russian assets ― is becoming entrenched, two EU officials with knowledge of the proceedings told POLITICO.

“The whole idea was to Trump-proof [aid to Ukraine] but it's a different situation now with Harris,” said one of the officials who, like others, was granted anonymity to speak freely.

Frozen assets

Since Harris replaced Biden as the Democratic Party's candidate for the Nov. 5 election, Trump's lead in opinion polls has evaporated. Of seven states identified by the Harris and Trump campaigns as key electoral college battlegrounds, Harris leads Trump in three, albeit only narrowly.

The Ukraine loan was agreed at the level of the G7 group of governments in June, but the EU and the U.S. continue to disagree over the details.

The majority of the assets have been frozen since Russian President Vladmir Putin's invasion of Ukraine. | Pool Photo by Mikhail Tereshchenko via Getty Images

With the vast majority of the assets frozen since Russian President Vladmir Putin's February 2022 invasion of Ukraine being held in Europe, Washington is demanding the EU guarantee they remain immobilized until Moscow pays post-war reparations to Ukraine. That way, the U.S. won't end up on the hook for repaying the loan if the assets are unfrozen.

But that's a difficult demand for the EU to meet because it would require unanimity, and several European countries are opposed.

Meeting canceled

Monday talks between EU and U.S. officials broke up without an agreement, with the American delegation insisting on the indefinite seizure of the Russian assets.

In a further sign of the difficulties, a planned Wednesday discussion among the EU’s 27 ambassadors on amending the sanctions rules was canceled at the last minute because the European Commission wasn't ready, three EU diplomats said.

The rules governing the EU’s current sanctions ― which must be renewed every six months ― allow a single country to unfreeze the assets, which in Washington’s view jeopardizes the loan. This matters because the U.S. must involve Congress in any operation that puts taxpayers' money at risk, which could draw out the process beyond the end-year deadline.

G7 leaders committed in June to finalizing an agreement by late October in a bid to lock in aid to Ukraine before the U.S. election.

A Harris administration could continue to offer bilateral support to Ukraine without going through the G7, the two officials said.

The U.S. government did not respond to a request for comment. Meanwhile, the Commission sidestepped questions about the disagreements, with a spokesperson reiterating that “the aim is to provide, together with G7 partners, around $50 billion in loans to Ukraine by the end of the year.”

The EU is under intense pressure to finalize the loan by that deadline. The bloc can use leftover funds in its seven-year budget as a backstop for the loan until then ― but if it misses the deadline, the decision requires unanimous approval.

The G7 loan would give significant relief to Ukraine's war-battered economy. | Samuel Corum/Getty Images

Next week the Commission is expected to put forward a formal proposal on how to structure the loan. It's not yet clear whether the EU will specify its contribution ― around $20 billion ― in an attempt to pressure the U.S. to pay its share, two other officials said.

The EU could theoretically issue the loan to Ukraine without waiting for its G7 allies, but several member countries believe that option might undermine Western unity; the European Central Bank, for its part, fears it carries excessive financial risks.

The G7 loan would give significant relief to Ukraine's war-battered economy. The country recently finalized a plan with its private creditors to push back debt repayments, but faces the prospect of a budget gap from early 2025.

On Wednesday IMF officials visited Kyiv as they undertake a review of a separate $15.6 billion loan program.

Popular British singer Charli XCX crowned Harris a “brat” ― the name of her album ― which over the summer became a byword for a transgressive and unapologetic lifestyle. The star told the BBC the concept represented “a pack of cigs, a Bic lighter and a strappy white top with no bra.”