G7 leaders agree to lend Ukraine billions of dollars guaranteed by Russia’s frozen assets. Here’s how it will work

Washington (AFP) – Leaders of the Group of Seven rich democracies have agreed to engineer a new strategy A $50 billion loan to help Ukraine In her fight to survive. Interest earned on profits from the frozen assets of the Russian Central Bank will be used as collateral.

Details of the deal were discussed by G7 leaders at their summit in Italy. The money could arrive in Kiev before the end of the year, according to American and French officials.

President Joe Biden told reporters at a press conference on Thursday that the move was part of a “historic agreement.” Ukrainian President Volodymyr Zelensky said that providing a loan through Russian assets “is a vital step forward in providing sustainable support to Ukraine in winning this war.”

Here’s how the plan works:

Where will the money come from?

Most of the money will be in the form of a loan, mostly guaranteed by the US government, backed by profits earned from frozen Russian assets worth about $260 billion. The vast majority of this money is located in European Union countries.

A French official said the loan could be “mobilized” with European funds or contributions from other countries.

A US official, who spoke on condition of anonymity to preview the agreement, said the official statement by G7 leaders scheduled for Friday would leave the door open to an attempt to completely confiscate Russian assets.

Why don’t we just give Ukraine the frozen assets?

This is much harder to do.

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

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The United States and its allies immediately froze which assets in the Russian central bank they could access and when Moscow invaded Ukraine In 2022. This was mainly money held in banks outside Russia.

The assets are idle and inaccessible to Moscow, but are still owned by Russia.

While governments can generally freeze property or funds without difficulty, converting them into confiscated assets that can be used for Ukraine’s benefit requires an additional layer of judicial procedures, including legal basis and adjudication in court.

The European Union did instead Aside profits resulting from frozen assets. This money pot is easy to access.

Separately, the United States this year passed a law called the Repo Act – short for Law on Rebuilding Economic Prosperity and Opportunities for Ukrainians – This allows the Biden administration to do so Seizing $5 billion in Russian state assets In the United States and used to the advantage of Kyiv. This arrangement is being worked on.

How and when can the loan be used?

It will be up to the technical experts to work through the details.

The US official said Ukraine would be able to spend the money in several areas, including military, economic, humanitarian and reconstruction needs.

Biden’s national security adviser, Jake Sullivan, said the goal is “to provide Ukraine with the resources it needs now for its economic energy and other needs so that it is able to have the resilience needed to withstand continued Russian aggression.”

The other goal is to get the money to Ukraine quickly.

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The French official, who was not authorized to reveal his name publicly in accordance with French presidential policy, said that details could be worked out “very quickly and in any case, the $50 billion will be disbursed before the end of 2024.”

Aside from the costs of war, the needs are great.

The World Bank Latest damage assessment in UkraineWorld Bank estimates, released in February, put the country’s reconstruction and recovery costs at $486 billion over the next ten years.

This move comes to open Russian assets after they were there Long delay In Washington, Congress approved military aid to Ukraine.

At an event organized by the Atlantic Council to review the G7 summit, John Herbst, the former US ambassador to Ukraine, said: “The fact that American funding cannot be fully relied upon is an additional very important reason to go this route.”

Who will be on the hook in the event of a default?

If Russia regains control of its frozen assets or if the frozen funds do not generate enough interest to repay the loan, “then the question of burden sharing will arise,” according to the French official.

Max Bergmann, director of the Europe, Russia and Eurasia Program at the Center for Strategic and International Studies, said last week that there are concerns among European finance ministers that their countries “will be left to shoulder the responsibility if Ukraine defaults on its debts.”

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Associated Press writers Sylvie Corbett in Paris, Darlene Superville in Fasano, Italy, and Colleen Long aboard Air Force One en route to Italy contributed to this report.

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