France to loan Ukraine over 37 million Euros to rebuild railways

The French government will loan 37,6 million euros to Ukraine for the supply of rail tracks to rebuild the country’s infrastructure, significantly damaged since the Russian invasion. This, according to Ukrainian Railways (UZ), is the first time that Ukraine obtained a long-term concessional loan.

As UZ’s Chairman of the Board Evgeny Lyashchenko pointed out, this initiative will provide the company with a “comfortable payment schedule”. Lyashcenko also highlighted that the items will be sold by France to Ukraine at prices “significantly below the market level”. The rail tracks will be provided by French manufacturer Saarstahl Rail, which will supply Kyiv with around 20,000 tons of rail tracks throughout this year.

Up until the beginning of the war, Ukrainian railways were mostly manufactured by Azovstal Iron and Steel Works, in Mariupol. However, the Ukrainian city fell into Russian hands in May after a siege that lasted for almost three months. Since then, “there were practically no producers of these products left in Ukraine”, UZ said, thus creating the need of looking to Europe.

A quite flexible loan for Ukrainian Railways

The loan has a duration of 35 years. The first 14 will be considered as a grace period, during which UZ does not have to start paying the French government back. After that, the annual interest rate is set at 0,016 per cent. This interest rate is what makes this agreement quite advantageous for Ukraine. Similar previous loans, for example, had an interest rate ranging between three and 20 per cent.

However, there is no established way to calculate the total costs of the materials yet. UZ underlined that there are two options. A formula that takes into account price fluctuations of raw materials such as scrap metal, electricity, iron ore, and coking coal, or a fixed price of 1,950 euros per ton. “The method of determining the price will be chosen by the buyer depending on which price is lower at the time of delivery”, the company claimed.