The US aims at contributing up to $20 billion towards a G7 loan to Ukraine, with repayments coming from profits on Russian assets that have been frozen, as negotiations intensify ahead of possible shifts in US assistance policy post-election.
According to three people with knowledge of the matter, FT, the United States will contribute up to 20 billion dollars to a $50 billion loan package organized by the G7 nations for Ukraine. This loan will be repaid with profits from frozen Russian assets mainly held in the European Union.
Currently, Euroclear manages EUR211 billion in Russian assets, the majority of which are held in Belgium. This is due to the ongoing Russo Ukrainian war. Euroclear will make EUR3 billion profit in 2023 from these funds.
According to FT the G7 countries are accelerating the pace of negotiations on the loan structure. They want to provide funding to Kyiv by the end the year. The urgency is a result of fears that if Donald Trump wins in November’s US presidential election, Washington’s assistance to Ukraine could be drastically reduced or even cut off.
FT reports that US officials told their G7 counterparts on 18 October that Washington would pay the original amount of $20 billion. This decision is despite expectations that the EU would only contribute a smaller amount due to its inability to guarantee Russian assets will remain immobilized at least for three years.
The EU has approved a contribution of up EUR35 billion to G7 loan. The EU is expected to generate around EUR3 billion per year in profits from the majority of Russia’s central bank assets that are frozen. The EU’s contribution may be reduced if US contributes the full $20 billion.
The UK, Canada and Japan are expected to provide the remaining portion of the 50 billion loan.
Hungary’s veto over the extension of the EU sanctions regime against Russia could be a potential obstacle in the negotiations. US officials said that Washington would still be able to contribute fully even if it failed to convince Hungarian Prime Minister Viktor Orban of his veto.
The G7 finance ministers will meet in Washington, DC on 25 October 2024. This meeting will take place on the sidelines of IMF/World Bank meetings. Two sources familiar with the discussions say that they are expected to release a statement outlining the loan distribution and its structure.
FT reports that a person familiar with the talks cautioned, however, that no agreement had yet been reached. The US is still consulting members of the US Congress and Ukraine on loan repayment terms.
Dmitry Peskov, the Russian presidential spokesman, has repeatedly stated that Russia is strongly opposed to the use its assets to fund Ukraine. He also warned of Moscow’s intentions to file lawsuits against anyone involved in this process. The current discussion is about using the income generated by these funds, rather than the actual funds.
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