Washington, D.C. The leaders of the Group of Seven wealthy democracies have agreed to help Ukraine get a $50 billion loan. The loan would be backed by interest earned on profits from Russia’s frozen central bank assets.
While the G7 leaders were meeting in Italy for a summit, the deal’s details were still being worked out. However, the money could get to Kyiv before the end of the year.
According to a French official who confirmed the deal on Wednesday, the deal will be officially announced at the summit. This is how the plan would work:
Where is the cash going to come from? Most of the money would come from a loan from the U.S. government, which would be backed by profits from selling off about $300 billion worth of Russian assets that were not being used. Most of the money is kept in countries in the European Union.
A French official said that the loan would be mostly backed by the U.S., but that it could be “topped up” with money from other European countries or other countries.
Why not just give the frozen assets to Ukraine? That’s not as easy to do.
For more than a year, government officials from several countries have argued about whether taking the money and sending it to Ukraine is legal.
When Russia invaded Ukraine in 2022, the U.S. and its allies froze the assets of the Russian central bank that they could get to right away. This mostly meant money that was held in banks outside of Russia.
Moscow has locked up the assets and can’t get to them, but they still belong to Russia.
In most cases, governments can easily freeze property or funds. However, to turn them into forfeited assets that can be used to help Ukraine, they need an extra layer of legal process, including a legal basis and a court decision.
The European Union has instead set aside the extra money that will be made from the assets that have been frozen. It’s easier to get to that pot of money.
The U.S. also passed a law earlier this year called the REPO Act, which stands for the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act. This law lets the Biden administration take $5 billion in Russian state assets in the U.S. and use them to help Kyiv. Plans are still being made for that to happen.
How and when could the loan be used?Professionals in the field will work out the specifics.
But on Wednesday, U.S. National Security Advisor Jake Sullivan said that the goal is to “give Ukraine the resources it needs now for its energy, economy, and other needs so that it can be strong enough to stand up to Russia’s continued aggression.”
One more goal is to quickly send the money to Ukraine.
According to French presidential policy, the official could not be named in public. He or she said that the details could be worked out “very quickly” and that the $50 billion would be sent out before the end of 2024.
There are a lot of needs, on top of the costs of the war. The World Bank’s most recent report on Ukraine’s damage, which came out in February, says that the country will need $486 billion over the next 10 years to rebuild and recover.
The move to free up Russia’s assets comes after the U.S. Congress took a long time to agree to give Ukraine military aid.
John Herbst, who used to be U.S. Ambassador to Ukraine, said at an Atlantic Council event before the G7 summit, “the fact that American funding is not quite reliable is a very important additional reason to go that route.”
In the event of a default, who would be responsible?The French official said that “the question of burden-sharing arises” if Russia got back control of its frozen assets or if the funds that had been frozen weren’t earning enough interest to pay back the loan.
The official said that it was still not clear who would lead the charge.
According to Max Bergmann, director of the Europe, Russia, and Eurasia Programme at the Centre for Strategic and International Studies, European finance ministers are worried that their countries “will be left holding the bag if Ukraine defaults.” This was said last week.
