According to insiders, the G7 countries could announce a fresh credit agreement for Ukraine as soon as this Thursday.
According to people familiar with the discussions, leaders of the Group of Seven countries are expected to announce as soon as Thursday a deal to lend money to Ukraine backed by the proceeds from frozen Russian investments. This will give the war-torn country a new source of income as it embarks on an arduous and expensive road to recovery.
The goal of the negotiations was to reach an agreement on a loan of around $50 billion, which would equal the profits on the investments, which yield an annual profit of about EUR 3 billion, over a ten-year period. By delivering the loan by the end of 2024, it will guarantee that the funds reach Ukraine ahead of any prospective US presidential transition. In the US presidential election scheduled for November, incumbent President Donald Trump is running against President Joe Biden, and the latter has stated that he will not commit to provide Ukraine with more funds.
Once Vladimir Putin gave the order to invade Ukraine in 2022, Western countries imposed a large wave of sanctions that included freezing Russia's assets in bank accounts situated in both Europe and the US. Only a small portion, about $3 billion, is held in US banks amidst hundreds of billions of frozen assets in Europe.
This caused European authorities to express fear that if Ukraine defaulted on the loan, the investments lost money, or the assets were returned to Russia as part of a peace agreement, they would be held financially responsible.
According to a senior US official, the agreement has been constructed such that each participating country bears a portion of the risk. Negotiators have been ironing out the last details in Brindisi, Italy, ahead of the arrival of the G7 leaders.
During a press briefing, an Élysée source stated, "This loan will be supplemented by money from Europe and will be provided by the United States mostly."
The French source continued, "Countries are still discussing how to partition the cost if the profits from Russian assets are not sufficient to cover the need."
The insider, who spoke under anonymity, mentioned European professional standards.
The insider stated, "The $50 billion will be transferred before the end of 2024."
While multiple nations will participate and iron out the technical specifics after the summit, US national security adviser Jake Sullivan told reporters accompanying Biden to the summit that the discussions were headed toward a "common understanding" of how the loan would be structured.
"I think we are moving in the right direction toward producing a solution that will allow those proceeds from those frozen assets to be used wisely," Sullivan stated.
In late 2023, while lawmakers took their time approving the White House's financial request, the G7 countries started deliberating how to find longer-term sources of finance for Ukraine. In the midst of uncertainty about the political and financial capacity to sustain public spending in Ukraine amidst a calendar packed with elections on both sides of the Atlantic, authorities started focusing on Russian funds collecting dust and interest payments in banks across the globe.
To account for time disparities throughout the globe, working groups headed by officials from the Treasury, State, and National Security Council convened three times a week for two hours each, starting at seven in the morning ET in early 2023.
The banks and clearing houses that handle and retain the monies expressed worries that merely removing the money would expose businesses and nations to legal action and retaliation from Russia. It was thought that using the earnings while Russia is unable to access the funds would serve as a workaround to address global legal issues.
"It's the distinction between having your house taken over by someone and having it rented out," Institute of International Finance president and CEO Tim Adams stated.
Since Russia's invasion, the US has given $175 billion to Ukraine; this amount currently exceeds the $171 billion (2024) that the US gave to the Marshall Plan, which was established to rebuild Europe following World War II. $107 billion in help has been provided by the European Union.
According to World Bank estimates, rebuilding Ukraine would cost more than $500 billion, a figure that rises daily as the conflict rages.
