The United States and Europe are collaborating on a plan to use interest earned on frozen assets in Russia's central bank to provide Ukraine with loans that can be used for military and economic aid, giving the country several loans as Russia's war effort intensifies. It could provide a billion-dollar lifeline. .
Treasury Secretary Janet L. Yellen said in an interview Sunday that several options for tapping $300 billion in stuck Russian assets remain on the table. But he said the most promising idea was for G7 countries to issue loans to Ukraine, backed by profits and interest income from Russian assets held in Europe.
Finance ministers from the Group of Seven (G7) countries are expected to meet in Italy later this week to finalize a plan that can be presented to leaders ahead of next month's summit. There is growing urgency to find ways to provide more financial support to Ukraine as the country's efforts to fend off Russia show signs of stalling.
“I think there is significant interest from all partners in a financing structure that brings forward the flow of windfall profits,” Yellen said on a flight to Germany for meetings ahead of the G7 summit. “It will generate a significant down payment that will help Ukraine meet its expected military and reconstruction needs.”
Western allies have been debating for months how much to leverage Russia's central bank assets. Although the United States believes it is legal under international law to confiscate this money and give it to Ukraine, several European countries, including France and Germany, have questioned the legality of such a step and the precedent it would set. I'm on guard.
The United States recently passed legislation giving the Biden administration the power to seize and confiscate Russian assets, but the desire to act in unison with Europe has largely sidelined that idea.
This month, European Union countries agreed in principle to use 90% of their profits to buy weapons for Ukraine through the European Peace Facility, the EU's mechanism for funding military aid and national military missions. . The remaining 10% will go towards reconstruction and non-lethal purchases to satisfy militarily neutral countries such as Ireland, Austria, Cyprus and Malta.
The Russian central bank's assets of around 190 billion euros are held by Belgium's central securities depository, Euroclear. The assets generate around 3 billion euros in interest annually, which could be transferred to Ukraine.
But by using interest as the basis for loans, Ukraine could provide much more money upfront, potentially as much as $50 billion. The method of delivering the funds still needs to be considered. The World Bank or other international organizations may act as intermediaries.
It also remains unclear how the loan would be repaid if the war ended before the bond matured or if interest rates fell so that the returns on the assets were insufficient to repay the loan. is.
These details are expected to be discussed when finance ministers meet later this week. They hope to be able to provide additional funding to Ukraine this summer.
Yellen said allocating funds to Ukraine is important to show that Russia cannot outweigh Western aid.
“I think Russia is playing a wait-and-see game. Russia's view is that the United States and its partners are losing interest in supporting Ukraine over the long term,” Yellen said. “I think showing that we have the means to turn the proceeds from frozen assets into a flow of aid to Ukraine is an important way to show that we're not going to go bankrupt. We can help. ” Ukraine. ”
