The European Commission said Wednesday it agreed to extend financial assistance to Ukraine, a key energy transit country, to help with economic reforms.

The commission, acting on behalf of the European Union, said it disbursed $650 million in assistance to Ukraine to address "urgent financing needs" necessary for economic stability. The loan is aimed at steering Ukraine through energy and financial sector reforms.

"Through this financial assistance, the EU is proud to support the courageous reform agenda pursued by the government," Valdis Dombrovskis, European commissioner for the euro, said in a statement. "I am confident that the implementation of those ambitious reforms will help Ukraine exploit its many assets to the full, so as to foster strong and sustainable economic growth for the benefit of all Ukrainian citizens."

The Ukrainian administration that took over in the wake of political upheaval in late 2013 said the economy was left in shambles by former President Viktor Yanukovych. More than a year after the revolt, the International Monetary Fund said real gross domestic product is expected to contract in Ukraine by more than 5 percent.

In April, the World Bank said ongoing conflict in the region has undermined investor confidence in Ukraine.

"Through the scope and magnitude of our assistance to Ukraine, we want to assure all Ukrainian citizens that they can count on the full support from their European neighbors," European Commissioner for Financial Affairs Pierre Moscovici said.

A gradual recovery is possible next year, the World Bank said, if peace takes hold and structural reforms reach to budget management and the energy sector.

Most of the Russian natural gas bound for European markets runs through Soviet-era pipelines in Ukraine. Economic battles between the Kremlin and Kiev have in the past interrupted gas supplies to Europe.