The European Union issued preliminary approval on a $106 billion loan for Ukraine Wednesday, after Hungary lifted its months-long veto on the funds. 

Most of the funding will go toward Ukraine's defense sector, which officials in Kyiv say is central to Europe's long-term security. The move may also signal a more constructive relationship with the bloc following the ouster of Hungarian Prime Minister Viktor Orbán earlier this month.

The loan, originally introduced in December, had been held up by a dispute between Hungary and Ukraine over an oil pipeline that runs through Ukrainian territory. Orbán vetoed the funds in February, accusing Ukraine of shutting down the Druzhba Pipeline, which delivers Russian oil through Ukraine to Hungary and Slovakia.

But on April 12, Orbán lost Hungary's parliamentary elections to center-right challenger Peter Magyar, who took a more supportive stance toward Ukraine during the campaign. Ukrainian President Volodymyr Zelenskyy says that the Druzhba Pipeline is now repaired and that Russian oil flows to Hungary and Slovakia have resumed.

The loan must still be officially approved by the EU after the EU ambassadors issued preliminary approval during a meeting on Wednesday, but with Hungary's veto dropped, no serious roadblocks remain.

Ukrainian officials say that a majority of the funds will go toward military production. 

"We know that roughly two-thirds will be spent on our defense industry," Yuriy Sak, an adviser to Ukraine's Ministry of Strategic Industries, told CBS News. "Our defense industry is capable of producing $50 billion worth of weapons but the government right now can only buy $15 billion."

The funds come at a crucial time for Ukraine's military, which has been slowly advancing during its fifth year of war with Russia, but with increasingly limited resources at its disposal.

"The lack of those funds has been harmful," Heorhii Tykhyi, spokesperson for Ukraine's Ministry of Foreign Affairs, told CBS News. "There have been certain defense projects that have already been under-funded or basically not put into action because of the lack of these particular funds, so we are very happy that this is finally moving forward."

Kyiv has also welcomed the loan as a sign of a more constructive relationship with the EU, which increasingly views Ukraine as a crucial security partner. 

"It is money for Ukraine's defense, but I think people now appreciate that this is for the European Union's defense," Sak said.

Said Tykhyi: "This loan is not an act of charity. It is not an act of solidarity with Ukraine. It is money intended to defend Europe from the Russian threat."

Hungary, which remains heavily reliant on Russian energy, could still complicate Ukraine's relationship with the bloc. But Ukrainian officials remain hopeful for a more productive relationship with Budapest's new government.

"Orban has been a bone in our throat," Sak said. "We have been getting mixed messaging from Magyar so we will have to see how it goes, but we know he is not going to be as disruptive as Orban."

Zelenskyy, speaking to journalists in Kyiv on Wednesday, was optimistic about the future of the relationship. 

"I very much hope that Hungary's position will be constructive toward us. We will also demonstrate steps to meet them halfway," he said. "We, as neighbors, surely must live in peace."