USAID on hold: Why billions in US aid to Ukraine have been frozen and what it means

Contents:

• What’s happening with USAID in Ukraine
• What projects did USAID fund in Ukraine?
• Assistance to government and media
• Will there be funds for pensions?

On his first day in office, President Trump paused foreign aid to other countries, including Ukraine. This involves funding through the US Agency for International Development (USAID). While the acronym may be unfamiliar to most Ukrainians, it has been a source of billions of dollars in aid. All USAID projects have been put on hold for 90 days. During this time, they will be audited. Afterward, the projects will either resume or be reviewed.

What’s happening with USAID in Ukraine

The decision to suspend aid came as a surprise both to Ukraine and many in the US. As a result, there has been much speculation surrounding this topic. The New York Times reported that military aid to Ukraine was also frozen, though it provided no details or sources for this information.

Andriy Kovalenko, head of the Center for Countering Disinformation at Ukraine’s National Security and Defense Council, stated that this information is false - military aid to Ukraine continues through previously approved packages.

However, USAID funding in Ukraine has indeed stopped. Agency project workers confirm the suspension of projects, halting of grant funding, and a pause in support for local government bodies.

"We’re working. We have, let’s say, a legal two months during which we will definitely not be fired. If they manage to conduct the audit and resume projects within these two months, we’ll continue to work. If not, it’s over," said one USAID project employee to RBC-Ukraine.

What projects did USAID fund in Ukraine

Before Russia’s full-scale invasion, USAID allocated relatively small amounts to Ukraine - several hundred million dollars, mostly for democracy and human rights projects. However, everything changed in 2022. Ukraine is now the largest recipient of USAID funds.

According to aggregated data from the Slovo i Dilo portal, USAID funded projects in Ukraine worth billions of dollars. In 2022, this amounted to $9 billion, in 2023 to $16 billion, and in 2024, the aid significantly decreased to $5.4 billion.

A worker of the USAID tuberculosis project (all photos: facebook.com/USAIDUkraine)

Currently, the agency is implementing 40 projects in Ukraine. These include areas such as humanitarian assistance, democracy, human rights, and governance, healthcare, peace and security, and education.

Of course, there have long been questions about specific projects and how American taxpayers' money is being spent. Ukrainian MP Maryan Zablotskyi provided a few examples:

• Support for the creation of a YouTube talk show Ebaut.
• Support for the music band TVORCHI in creating a song and performing at concerts in Ukrainian cities (Song Razom was created and distributed).
• Support for the NGO CUKR in organizing a series of cultural events during the summer season in Dvoryk na Kuznechniy. Creation of a mural in Dvoryk na Kuznechniy.
• Support for the company Film UA in producing a documentary film Tisto.

However, about 90% of USAID funds were allocated to the state and local communities rather than NGOs, notes a source in RBC-Ukraine involved in grant distribution. For example, the Hoverla project supports local government: from training local deputies and activists to providing generators and repairing schools and hospitals.

"We rarely talk about the fact that the Americans funded the repair of, say, 50 hospitals or the establishment of all the power generation capacity that President Zelenskyy boasts about. In fact, the entire extensive generation and the relatively smooth running of this heating season is due, firstly, to the work of air defense, and secondly, to the energy workers who have the money and equipment to carry out these repairs. And all this is happening thanks to donor funding," said Sviatoslav Pavliuk, Executive Director of the Energy Efficient Cities of Ukraine Association, to RBC-Ukraine.

Humanitarian aid from USAID

This is especially true for municipal enterprises, which do not have the funds to purchase energy equipment, design it, or connect it to the grid. Therefore, aid was provided both for the equipment itself and for its maintenance. Currently, there is a situation where even with installed cogeneration machines, difficulties arise with their connection to the networks. According to Pavliuk, many local administrations held tenders, signed contracts, and received services, but now they do not have the funds to pay for the necessary work because USAID funding has been blocked.

Assistance to government and media

Projects in the area of democracy, human rights, and governance are aimed at supporting government bodies in developing legislation and improving the qualifications of officials. This is usually done by engaging Ukrainian or foreign experts, whom the government may not always be able to afford to pay on its own.

In addition, USAID grants partially financed the tender committees in the Constitutional Court and the High Qualifications Commission of Judges.

In addition, a number of Ukrainian media outlets were funded by grants, particularly in regions where the advertising market is small. The philosophy of these projects is to ensure that the media should not be dependent on local elites and at least partially unbiased.

Specialized equipment purchased by USAID

Several USAID grants were allocated to the National Public Broadcasting Company of Ukraine and Hromadske, though these outlets have other sources of income. USAID also funded small local media in frontline areas, where the target audience is under occupation.

For instance, in the Luhansk region, there were relocated media outlets such as Severodonetsk Online, Tribune from Rubizhne, Realna Hazeta from Luhansk, Donbas News, and Farwater.Skhid. For such media, the loss of American funding is felt more acutely and, in some cases, critically.

Will there be funds for pensions?

On January 28, President of Ukraine Volodymyr Zelenskyy tasked the government with reporting on the suspended programs. He specifically mentioned Oleksii Kubela, the Vice Prime Minister for Ukraine’s Reconstruction and Minister for Communities and Territories Development.

"There are many projects. We will identify which ones are critical and require decisions right now," the President said in his evening address.

Zelenskyy added that some of this funding could potentially be secured from the state budget, and for the remaining projects, there will be discussion "with Europeans and Americans."

The suspension of USAID projects for three months will not impact the financing of budget programs, including social benefits and pensions, according to an RBC-Ukraine source in the government’s economic block. Protected budget items do not depend on grant assistance provided through USAID.

"For this year, we are secured with funds, including profits from frozen Russian assets amounting to $50 billion. The American share of this sum, like that of all other partners, will go through the World Bank program, so there are no risks for the Ukrainian budget," the source explained.

Iryna Vereshchuk, Deputy Head of the Presidential Office, responsible for humanitarian response, noted that negotiations are planned to restore certain projects involving the government.

"A 90-day pause from a key donor cannot but raise concerns. However, I am confident that we will stabilize the humanitarian direction. In the near future, we will begin substantive consultations with our American partners to continue funding humanitarian response projects in Ukraine as soon as possible.," Vereshchuk said.

Fertilizers for farmers purchased by USAID

Consultations with European donors have also started in the Verkhovna Rada (Ukrainian Parliament - ed.). The discussions are focused on replacing American aid, at least until the final decisions are made in the US. However, past experience shows that the European Union allocates such funds very slowly, usually over 4 to 6 months.

As for local communities in the regions, tough months lie ahead. Local budgets lack the funds to complete ongoing projects.

"The budget is planned a year in advance, and it's already allocated. Most cities have lost their personal income tax revenue, city budgets are falling, and many people have left," emphasized Pavliuk.

US Secretary of State Marco Rubio has the authority to quickly restore certain important projects. However, most of them are likely to be reviewed. At the same time, USAID remains a critical tool for the US, and it's unlikely they will abandon it.

"I don't see a way to dominate globally without funding a large number of humanitarian or influence programs. And the US will undoubtedly return to this. We just need to explain how important it is - calmly, without emotions," said Mykhailo Podolyak, advisor to the Head of the Presidential Office, in a commentary to the RBC-Ukraine YouTube channel.

Assistance from USAID

A source involved in grant distribution told RBC-Ukraine that the audit is likely to focus not on the effectiveness of achieving project goals but on whether they align with Trump’s foreign policy.

However, even the temporary withdrawal of several billion dollars from Ukraine will have a negative indirect effect on the economy. According to Pavliuk, the funds received from grants remain in Ukraine, people are hired for them, and these funds go to the budget through taxes and are used to support the army. Any reduction in such assistance will ultimately lead to lower budget revenues.

Sources: Slovo i Dilo portal, the official USAID website, exclusive comments of the Executive Director of the Energy Efficient Cities of Ukraine Association Sviatoslav Pavliuk, RBC-Ukraine's sources in the Ukrainian government and USAID projects.