How the G7 plans to tap frozen Russian assets to fund a massive Ukraine aid package

G7 leaders have agreed to a $50 billion loan for Ukraine, backed by profits from Russia’s frozen $300 billion assets in the central bank. The funds could reach Ukraine by the end of the year. 

First Look

Leaders of the Group of Seven wealthy democracies have agreed to engineer a $50 billion loan to help Ukraine in its fight for survival that would use interest earned on profits from Russia’s frozen central bank assets as collateral.

Details of the deal were still being hashed out as G7 leaders gathered for a summit in Italy, but the money could reach Kyiv before the end of the year. That’s according to a French official who confirmed the agreement on June 13 ahead of a formal announcement at the summit. Here’s how the plan would work:

Where would the money come from?

Most of the money would be provided in the form of a loan from the U.S. government that would be backed by windfall profits being earned on roughly $300 billion in immobilized Russian assets. The vast majority of the money is being held in European Union nations.
A French official said that while the loan would be mostly U.S.-guaranteed, it could be “topped up” with European money or other national contributions.

Why not just give Ukraine the frozen assets?

That’s 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.
The U.S. and its allies immediately froze whatever Russian central bank assets they had access to when Moscow invaded Ukraine in 2022 – basically, money being held in banks outside Russia.

The assets are immobilized and can’t be accessed by Moscow – but they still belong to Russia.

While governments can generally freeze property or funds without difficulty, turning them into forfeited assets that can be used for the benefit of Ukraine requires an extra layer of judicial procedure, including a legal basis and adjudication in a court.

So the European Union instead has set aside the windfall profits being generated by the frozen assets. That pot of money is easier to access.

Separately, the United States earlier this year passed a law called the REPO Act – short for the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act – that allows the Biden administration to seize $5 billion in Russian state assets located in the U.S. and use them for the benefit of Kyiv. That arrangement is still being worked out.

How could the loan be used – and how soon?

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

But U.S. national security adviser Jake Sullivan said June 12 that the goal is “to provide the necessary resources to Ukraine now for its economic energy and other needs so that it’s capable of having the resilience necessary to withstand Russia’s continuing aggression.”
Another goal is to get the money to Ukraine fast.

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

Beyond the costs of the war, the needs are great. The World Bank’s latest damage assessment of Ukraine, released in February, estimates that costs for reconstruction and recovery of the nation stand at $486 billion over the next 10 years.

The move to unlock Russia’s assets comes after there was a long delay by the U.S. Congress in approving military aid for Ukraine.
At an Atlantic Council event previewing the G7 summit, former U.S. Ambassador to Ukraine John Herbst said “the fact that American funding is not quite reliable is a very important additional reason to go that route.”

Who would be on the hook in the case of a default?

If Russia regained control of its frozen assets or if the immobilized funds weren’t generating enough interest to pay back the loan, “then the question of burden-sharing arises,” according to the French official.

Who would shoulder the burden is still to be worked out, the official said.

Max Bergmann, director of the Europe, Russia, and Eurasia Program at the Center for Strategic and International Studies, said last week that there were worries among European finance ministers that their countries “will be left holding the bag if Ukraine defaults.”

This story was reported by The Associated Press. AP writers Sylvie Corbet in Paris and Colleen Long aboard Air Force One en route to Italy contributed to this report.