G7 leaders agree to lend Ukraine billions backed by Russia’s frozen assets. Here’s how it will work
WASHINGTON — The leaders of the Group of Seven wealthy democracies have agreed to a $50 billion loan to help Ukraine in its struggle for survival, using the interest earned on profits from the frozen assets of Russia’s central bank as collateral.
Details of the deal were still being announced as G7 leaders met for a summit in Italy, but the money could reach Kiev before the end of the year. That’s according to a French official who confirmed the agreement on Wednesday ahead of a formal announcement at the summit. Here’s how the plan would work:
Most of the money would come in the form of a loan from the U.S. government, which would be backed by windfalls earned from about $300 billion in immobilized Russian assets. The vast majority of the money is held in European Union countries.
A French official said that while the loan would be largely guaranteed by the US, it could be “supplemented” with European money or other national contributions.
That’s much harder to do.
For more than a year, officials from multiple countries have debated the legality of seizing the money and sending it to Ukraine.
The US and its allies immediately froze all assets of the Russian central bank to which they had access at the time Moscow invaded Ukraine in 2022 – essentially money held in banks outside Russia.
The assets are immobilized and inaccessible to Moscow, but they still belong to Russia.
While governments can generally freeze property or funds without difficulty, converting them into forfeited assets that can be used for the benefit of Ukraine requires an additional layer of legal proceedings, including a legal basis and adjudication in court.
So the European Union has done that set aside the unexpected gains generated by the frozen assets. That pot of money is easier to access.
In addition, earlier this year the US passed a law called the REPO Act – short for the Law on Rebuilding Economic Prosperity and Opportunities for Ukrainians – that allows the Biden administration to do so to seize $5 billion in Russian state assets based in the US and using it for the benefit of Kiev. This arrangement is still being worked out.
It’s up to technical experts to work out the details.
But U.S. National Security Advisor Jake Sullivan said Wednesday that the goal is “to provide Ukraine with the necessary resources now for its economic energy and other needs so that it is able to have the resilience needed to withstand Russia’s continued aggression .”
Another goal is to get the money to Ukraine quickly.
The French official, who was not authorized to be named publicly under French presidential policy, said the details “can be worked out very quickly and that in any case the $50 billion will be disbursed before the end of 2024.”
In addition to the costs of the war, the needs are great. That of the World Bank most recent injury assessment of Ukrainepublished in February, estimates that the cost of rebuilding and restoring the nation over the next decade will be $486 billion.
The move to free up Russia’s assets comes after a long delay by the US Congress in approving military aid to Ukraine.
At an Atlantic Council meeting previewing the G7 summit, former US Ambassador to Ukraine John Herbst said that “the fact that US financing is not entirely reliable is a very important additional reason to go down that path. ”
If Russia regains control of its frozen assets or if the immobilized funds do not earn enough interest to repay the loan, “then the question of burden sharing arises,” the French official said.
Who will bear the burden is yet to be worked out, the official said.
Max Bergmann, director of the Europe, Russia and Eurasia Program at the Center for Strategic and International Studies, said last week that there were concerns among European finance ministers that their countries “will be left holding the bag if Ukraine defaults.” .”
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Associated Press writers Sylvie Corbet in Paris and Colleen Long aboard Air Force One en route to Italy contributed to this report.