By Andrew Gray, Jan Strupczewski and John Irish

BRUSSELS (Reuters) – A European Union plan to send 1 million artillery shells to Ukraine is being held up as member states argue over how far spending for the plan will stay within the EU, diplomats and officials said on Thursday.

EU foreign ministers approved the groundbreaking package on March 20. The most immediate part of the plan earmarked 1 billion euros ($1.09 billion) to refund EU countries for sending urgently needed artillery shells from stockpiles to Ukraine.

The legislation for that element has now been finalised and is expected take effect in the coming days, diplomats and officials said, speaking on condition of anonymity.

But a second element – a landmark EU move into joint munitions procurement, worth another 1 billion euros – has been held up by disagreements over which countries’ companies are eligible for contracts, they said.

In announcing the package, EU foreign policy chief Josep Borrell said the munitions would come from “European industry and from Norway”. Draft legislation agreed by ambassadors from EU countries, seen by Reuters, used the same formulation.

But diplomats said France – a champion of European defence integration, with a substantial arms industry of is own – had pushed to tighten the definition of “European industry” to ensure as much of the funding as possible went to EU companies.

Greece and Cyprus have also been keen on a tight definition, expressing concern that some of the cash to buy 155-millimetre artillery shells and missiles may end up with sub-contractors or suppliers in Turkey, according to diplomats.

But other EU countries rejected attempts to tighten the language, diplomats and officials said.

Officials from Germany, Poland and the Netherlands have argued that too many limits on supply chains would delay getting ammunition to Ukraine, especially as many already harbour doubts that European industry has the capacity to meet the target of 1 million shells in 12 months.

“France was asking for more language to further solidify the ‘buy European’ text,” said a source close to the committee of EU ambassadors who negotiate key political deals.

After the request was rejected, the matter “has to go back to Paris for agreement, which will only come after Easter”, the source said.

Diplomats and officials expressed confidence that EU countries would finalise a deal after the Easter break.

If the delay is only a few weeks, it should not impact the overall EU effort to get ammunition to the battlefield as the fast-track element has already been approved, diplomats said.

A French official indicated Paris would not block efforts to move ahead for any great length of time.

“We will first buy European. European financing must serve to buy European,” the official said. “But we also have to be realistic.”

($1 = 0.9163 euros)

(Reporting by Andrew Gray, Jan Strupczewski and John Irish; Writing by Andrew Gray; Editing by Jan Harvey)

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