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G7 wants to use Russian state assets for Ukraine aid

G7 wants to use Russian state assets for Ukraine aid
G7 wants to use Russian state assets for Ukraine aid

The G7 is supporting Ukraine in its defense against Russia – but this is costing a lot of money. In order to mobilize billions more, the aggressor’s frozen assets are now to be used even more effectively.

Ukraine is receiving a new, huge support package from the group of leading democratic industrial nations (G7) for its defensive struggle against Russia. Negotiators of the G7 heads of state and government agreed at the summit in Apulia, southern Italy, to use interest from frozen Russian state assets to finance a loan package worth around 50 billion US dollars (around 47 billion euros), as several diplomats told the German Press Agency on Thursday. The money is to be made available by the end of the year.

Ukraine is to use the billions to strengthen its defense against Russia, pay for the reconstruction of destroyed infrastructure and offset possible financial bottlenecks in the Ukrainian state budget.

Around 260 billion euros frozen in Western countries

The plans were developed to use interest income from frozen Russian state assets even more effectively. The EU states had already recently decided to make it available directly to finance military aid for Ukraine. The effect can now be significantly increased again using the so-called credit leverage.

According to the US government, around 280 billion US dollars (around 260 billion euros) of Russian central bank funds have been frozen in Western countries since the Russian attack on Ukraine. The lion’s share is within the European Union: around 210 billion euros, according to the Commission. Russia’s frozen money generates billions in interest income every year. The Brussels-based financial institution Euroclear recently announced that it had earned around 4.4 billion euros in interest in 2023. It is by far the most important institution in the EU that holds assets of the Russian central bank.

Planning for the loan project has been underway for months. The USA had originally advocated not only confiscating the interest income, but also the frozen assets themselves and using them to provide financial support to Kiev. The European states had major reservations about this. In the end, the Americans put forward a compromise proposal to use only the interest income from the Russian assets to secure a large loan package for Ukraine.

G7 meet in Apulia, Italy – war against Ukraine top topic

US Treasury Secretary Janet Yellen wrote in a guest article for the New York Times on Thursday that the loan for Ukraine would be repaid over time through interest income. The funds would give Ukraine the resources it needs for defense and reconstruction – “paid for from the proceeds of Mr. Putin’s own fortune.” Yellen stressed that such a package would also send a clear message to Russian President Vladimir Putin: that Ukraine’s allies would stand by Kiev in the long term.

US President Joe Biden’s National Security Advisor Jake Sullivan had previously stressed that the G7 heads of state and government would only provide the framework. Any remaining detailed questions should now be clarified as quickly as possible by the finance ministers. Until recently, for example, it was unclear who would bear the credit risks if EU sanctions decisions to freeze Russian assets could not be extended due to a member state’s veto.

The G7 group includes Italy, Germany, France, Great Britain, Japan, Canada and the USA. Their heads of state and government are meeting until Saturday at this year’s summit in a luxury hotel in “Borgo Egnazia” in Apulia in southern Italy. Council President Charles Michel and Commission President Ursula von der Leyen are representing the EU. Ukrainian President Volodymyr Selenskyj is also attending as a guest. The Russian war of aggression against Ukraine is at the top of the agenda of the meeting.

Source: Stern

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