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How the G7 will lend money to Ukraine backed by frozen Russian assets

How the G7 will lend money to Ukraine backed by frozen Russian assets

The rulers of the countries of the Group of Seven agreed to a US$50 billion loan in order to help Ukraine in its fight for survival, which would be backed by interest generated from the frozen assets of the central bank of Russia.

Leaders of the world’s seven richest democracies are still working out the details during their summit in Italy. kyiv could receive the funds before the end of the year, according to US and French officials.

US President Joe Biden said at a press conference on Thursday that the measure is part of a “historic agreement”. For his part, the Ukrainian president, Volodymyr Zelenskyynoted that providing a loan through Russian assets “It is a fundamental step forward in order to provide sustainable support for Ukraine to win this war”.

This would be the plan: Where would the money come from?

Most of the money would be in the form of a loan largely guaranteed by the U.S. government, backed by profits from the nearly $260 billion in frozen Russian assets. The vast majority of these funds are held by European nations.

A French official noted that the loan could “increase” with European funds or contributions from other countries.

A U.S. official, who provided an overview of the deal on condition of anonymity, said the official G7 statement to be released Friday will leave the door open to attempts to seize all Russian assets.

Why not just give Ukraine the frozen assets?

That’s much harder to do.

For more than a year, officials in various countries have debated the legality of confiscating the money and sending it to Ukraine.

The United States and its allies immediately froze all Russian central bank assets they had access to after Moscow ordered an invasion of Ukraine in February 2022. Essentially, that money was in banks outside Russia.

The assets are frozen and the Kremlin You don’t have access to them, but they still belong to Russia.

While governments can generally freeze property or funds without much difficulty, turning them into seized assets to benefit Ukraine requires a new layer of judicial procedures, including a legal basis and a court adjudication.

Instead, the European Union has set aside the profits that these frozen goods have generated. It is easier to access those funds.

Separately, the United States passed a law this year called the REPO Act — the Ukrainian Reconstruction, Economic Prosperity, and Opportunity Act — which allows the Biden administration to confiscate $5 billion in Russian state assets. in the United States and use them to benefit Kiev. That agreement is already being worked on.

How could the loan be used and how soon?

The details will be left to the technical experts.

Ukraine will be able to spend the money in different areas, including military, economic and humanitarian needs, as well as reconstruction, a US official said.

Biden’s national security advisor, Jake Sullivan, noted that the goal is “provide the necessary resources to Ukraine at this time for its economic energy and other needs, so that it is able to have the necessary resilience to withstand Russia’s continued aggression”.

Another goal is to deliver the money quickly to Ukraine.

The French official, who was not authorized to be publicly identified in accordance with the policies of the French presidency, said the details could be worked out “very quickly and, in any case, the US$ 50,000 million will be disbursed before the end of 2024″.

Regardless of the costs of war, Ukraine has many needs.

The most recent damage assessment by the world Bank for Ukraine, released in February, estimates that the costs of rebuilding and recovering the country are $486 billion over the next 10 years.

The move to tap into Russian frozen asset interests came after approval for military assistance to Ukraine was long delayed in the U.S. Congress.

At an event at the Atlantic Council research center prior to the summit of the G7a former US ambassador to Ukraine, John Herbst, noted that “The fact that US financing is not entirely reliable is a very important additional reason to make that decision.”.

Who would be responsible in case of non-payment?

Should Russia regain control of its frozen assets, or if the frozen funds do not generate sufficient interest to cover the loan, “then the question arises of sharing the load”, according to the French official.

Max Bergmann, director of the Europe, Russia and Eurasia Program at the Center for Strategic and International Studies, noted last week that there was concern among Europe’s finance ministers that their countries “end up bearing the responsibility in case of a default from Ukraine”.

Some countries criticized the plan to seize Russian assets.

Liu Pengyu, a spokesman for the Chinese embassy, ​​told The Associated Press that Washington “fuels dispute and incites confrontation”.

We urge the United States to immediately stop its unilateral imposition of illegal sanctions and play a constructive role in ending the conflict and restoring peace”, he stated.

Source: Gestion