US, NATO developing novel funding mechanism for Ukraine weapons transfers

By Gram Slattery, Mike Stone and Phil Stewart

WASHINGTON (Reuters) -The United States and NATO are working on a novel approach to supply Ukraine with weapons using funds from NATO countries to pay for the purchase or transfer of U.S. arms, according to three sources familiar with the matter.

The renewed transatlantic cooperation on Ukraine comes as U.S. President Donald Trump has expressed frustration with Moscow's ongoing attacks on its neighbor. Trump, who initially took a more conciliatory tone toward Russia as he tried to end the more than three-year war in Ukraine, has threatened to start imposing tariffs and other measures if Moscow shows no progress toward ending the conflict by August 8.

The president said last month the U.S. would supply weapons to Ukraine, paid for by European allies, but did not indicate how this would be done.

NATO countries, Ukraine, and the United States are developing a new mechanism that will focus on getting U.S. weapons to Ukraine from the Priority Ukraine Requirements List, known under the acronym PURL, the sources said.

Ukraine would prioritize the weapons it needs in tranches of roughly $500 million, and NATO allies - coordinated by NATO Secretary General Mark Rutte - would then negotiate among themselves who would donate or pay for items on the list. 

Through this approach, NATO allies hope to provide $10 billion in arms for Ukraine, said a European official, speaking on condition of anonymity. It was unclear over what timeframe they hope to supply the arms.

"That is the starting point, and it's an ambitious target that we're working towards. We're currently on that trajectory. We support the ambition. We need that sort of volume," the European official said.

NATO declined to comment. The White House, Pentagon, and Ukrainian embassy in Washington did not respond to requests for comment.

Russian forces are gradually advancing against Ukraine, and control one-fifth of Ukraine's territory. 

FASTER ARMS RESTOCKING

If a NATO country decides to donate weapons to Ukraine, the mechanism would allow that country to effectively bypass lengthy U.S. arms sales procedures to replenish its own stocks, said one U.S. official, speaking on condition of anonymity. 

But the NATO country would have to pay the U.S. up front for the speedier replenishment. The money would be paid into a U.S.-held account, possibly at the U.S. Treasury Department, or to an escrow fund, although the exact structure remains unclear, the official said. 

NATO countries also have the option of simply paying the United States to send weapons directly to Ukraine. In that case, the payment could be made via NATO or directly to the U.S. Department of Defense, said a second source, speaking on condition of anonymity.

This would be in addition to the United States' own effort to identify arms from U.S. stockpiles to send to Ukraine under the Presidential Drawdown Authority, which allows the U.S. president to draw from current weapons stocks to help allies in an emergency.

At least one tranche of weapons for Ukraine is currently being negotiated under the new mechanism, two sources said, though it was unclear if any money has yet been transferred.

Trump's fellow Republicans in Congress have introduced legislation, known as the PEACE Act, that aims to create a fund at the U.S. Treasury in which allies can deposit money that would pay to replenish U.S. military equipment donated to Ukraine.

Ukraine's needs remain consistent with previous months - air defenses, interceptors, systems, rockets, and artillery. The last statement of need from Ukraine came at the July 21 Ramstein conference led by EU allies, including Britain.

(Reporting by Gram Slattery, Mike Stone, Phil Stewart in Washington; additional reporting by Patricia Zengerle in Washington and Andrew Gray in Brussels; editing by Michelle Nichols and Rod Nickel)