How G7 and EU plan to leverage frozen Russian Assets for Ukraine

BRUSSELS, Belgium (Reuters) – The Group of Seven and the European Union have been discussing how to use the profits from Russian assets that were immobilised by the West in order to give Ukraine a large upfront loan and to secure Kyiv’s financing until 2025.


Around 260 billion euro of Russian central bank money is frozen in various parts of the world, with most of them being in the EU. The funds produce 2.5-3.5 billion euro profit a year, which is not contractually due to Russia. It’s a windfall according to the EU. The United States has proposed to use the profit to pay for a large $50 billion loan that could be raised through the market. Russia claims that any diverting of profits from its frozen fund would be theft.


Senior European officials believe that an agreement on a loan to be made at the G7 summit in June, which includes the U.S.A, Canada, Japan Britain, France Germany and Italy, would send an important message of unity for Kyiv, just before an international conference about Ukraine is held in Switzerland. This would ensure that Kyiv is able to finance itself until 2025, regardless of who wins the U.S. Presidential election on November 5th.


Senior European officials have said that discussions are increasingly focused on two options, depending on who would lend the money to Ukraine. Different details will be worked out depending on which option is chosen.


In one scenario, which is supported by the majority of EU member countries, Washington would borrow money from the market, and the European Union could assure Washington that the profits generated would be used to pay back the U.S. debt.

This option has the advantage that it’s quick and doesn’t create new debt obligations for European countries — a very important consideration for an EU group led by Germany.

Washington is concerned about the amount and type of assurances it needs, as well as who will guarantee repayment, and to what extent, of this borrowing. This is especially true if the Ukrainian government decides to restructure its debt or if interest rates change, which could throw off the initial calculations.

Many EU governments would like G7 countries, perhaps proportionally to their GDP size, to share the risk.

Washington is worried that a veto by Hungary, which has close ties to the Kremlin and is close to Russia, could stop the flow of money. Washington wants the sanctions regime to be changed.

Diplomats from Hungary said that they want the EU leaders to discuss the matter of leveraging profits on the 27th and 28th of June.


Another option is for the EU to borrow money on its own and guarantee the repayment of the bonds by using money from the EU budget.

The biggest advantage is that everything stays within the EU: the EU is free to use any windfall profits it wishes and no changes are needed to the sanctions regime in order to bypass Hungary, because the EU Macro Financial Assistance Framework allows for loans to be approved by qualified majority rather than unanimity.

It would take a long time to get the European Parliament’s consent. The new European Parliament is only elected on the 9th of June and will be constituted in July, before a long summer break. It would take months to get the consent of parliament.

Berlin is particularly opposed to this idea.

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