Meeting in Italy - G7 countries aim to employ Russian government resources for aiding Ukraine.
Ukraine is expected to receive substantial assistance from the G7 countries to bolster its defense against Russia. According to sources, the leaders of these nations have agreed to create a credit package valued at approximately $50 billion (equivalent to 47 billion euros) using the interest accumulated from frozen Russian government assets. The financing is set to be made accessible before year-end.
The funds will be utilized to enhance Ukraine's defensive capabilities against Russia, fund the restoration of damaged infrastructure, and cover potential shortfalls in the Ukrainian government budget.
Over 260 billion euros held in Western countries
The plans have been devised to better utilize the interest from these frozen Russian state assets. EU nations had previously opted to use the funds to directly finance military aid for Ukraine. However, the impact of such leverage can now be amplified through the credit system.
There are roughly 260 billion euros worth of Russian central bank funds that have been frozen in Western countries since Russia invaded Ukraine. The EU has the most substantial portion of this sum, with approximately 210 billion euros, according to the EU Commission. These assets produce billions in annual interest. Recently, Euroclear, a Brussels-based financial institution, reported earning around 4.4 billion euros in interest in 2023 for storing Russian central bank assets. This entity is the EU's most prominent one to hold Russian central bank assets.
Development of the credit project commenced several months ago. The United States initially espoused the notion of leveraging not only the interest from frozen assets, but also the assets themselves to support Ukraine financially. However, European nations vigorously objected. Finally, the US suggested a concession: solely the interest from Russian assets would be utilized to generate a substantial credit package for Ukraine.
G7 meet in Italy - Ukraine war a primary concern
As stated in a New York Times op-ed by US Treasury Secretary Janet Yellen, the loan for Ukraine would be repaid gradually using the interest derived from Putin's assets. Yellen emphasized that this financial support would signify Ukraine's allies stand in solidarity with Kyiv in the long term.
National Security Advisor for US President Joe Biden, Jake Sullivan, previously highlighted that G7 leaders would only establish the framework. The specifics should now be clarified by finance ministers at the earliest convenience. For instance, it remains uncertain who will bear the credit risk if European sanctions on freezing Russian assets are hindered by a member state's veto.
The G7 includes Italy, Germany, France, Great Britain, Japan, Canada, and the United States. The heads of state and government of these nations have been consulting until Saturday at this year's summit at the upscale hotel "Borgo Egnazia" in Apulia, Italy's southern region. Additionally, EU President Charles Michel and Commission President Ursula von der Leyen are in attendance, while the Ukrainian President Volodymyr Zelenskyy serves as a guest. The Russian invasion of Ukraine is of utmost importance at the gathering.
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The credit package, worth around $50 billion or 47 billion euros, will be generated using the interest from the frozen Russian government assets, mainly held by EU countries such as the EU Commission with approximately 210 billion euros. The G7 countries, including the USA and Italy, aim to utilize these funds to support Ukraine's defense against Russia, as well as to restore damaged infrastructure and cover budget shortfalls.
