After G7 Summit, EU will consider using windfall profits on Russian assets to leverage EU’s financial resources

BRUSSELS, (Reuters) – After the G7 Summit in late June, European Union Finance Ministers will examine a G7 Plan for leveraging the windfall profits generated from Russian assets that were immobilised by the West following Russia’s invasion in Ukraine.

After a video conference of EU Ministers on Wednesday, Paschal Donohoe who chairs meetings for euro zone finance minsters said that the support was unwavering to help Ukraine with its financing needs.

In a statement released after the teleconference, Donohoe stated that the discussion between ministers “showed appreciation for the constructive engagement in this area with G7 partners and full support to continue it.”

He added that “Finance Ministers will discuss at their meeting in June the need for additional discussions after the G7 Summit held in Apulia.”

After Moscow invaded Ukraine in February 2022 the western countries immobilised about $300 billion of Russian central banks assets. These assets generate annual profits between 2.5 and 3.5 billion euros.

Although seizing the assets’ capital would be risky from a legal perspective, European governments have agreed that the profits generated through the frozen capital can be used because they do not belong to Moscow.

The European Union (where the majority of assets are located) agreed to place the annual profits in a fund special that would be used to pay for the weapons needed for Ukraine as well as the reconstruction costs.

Washington is pushing for the G7 to give a huge loan to Ukraine, now, at a time when it’s most needed. It doesn’t want to settle for just a few billion euro a year, over a longer period.

According to the G7 plan that the EU will review after the G7 meeting held in Italy from June 13-15th, the profits from the assets frozen would be used to pay the interest on a loan given by either the United States or the U.S. with other G7 nations, or even by the EU.

Interest, maturity and the size of loan are still being discussed. Janet Yellen, U.S. Treasury secretary, has stated that the loan may amount to $50 billion.

A discussion paper for EU ministers stated that in order to provide such a loan, either by bilaterally from all or some of the G7 countries or the EU, or through a market-based method and an intermediary like the World Bank, the EU must give assurances to loan-issuers that profits from assets will be available to pay for it.

To remove uncertainty, the EU would have to change its sanctions regime in relation to Russia’s frozen assets and remove the requirement for it to be renewed unanimously every six months.

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