G7 agrees $50bn loan for Ukraine from Russian assets
The G7 has agreed to utilize frozen Russian assets to generate $50 billion (£39 billion) for Ukraine, aiding its defense against the Russian invasion.
US President Joe Biden emphasized this move as a firm signal to Russia that “we’re not backing down,” although Moscow has warned of “extremely painful” retaliatory measures.
The funds are expected to be available by the end of the year, providing long-term support for Ukraine’s war efforts and economy.
Additionally, at the G7 summit in Italy, Ukrainian President Volodymyr Zelensky and President Biden signed a “historic” 10-year bilateral security agreement. This deal promises US military and training assistance to Ukraine, but does not require the deployment of US troops.
Following Russia’s full-scale invasion of Ukraine in 2022, the G7, along with the EU, froze approximately $325 billion worth of Russian assets. These assets generate about $3 billion annually in interest.
The G7 plan proposes using this $3 billion interest to cover the annual interest payments on the $50 billion loan Ukraine will take out on international markets.
Speaking at a joint news conference at the summit’s venue in Puglia, southern Italy, President Biden said the $50bn loan would “put that money to work for Ukraine and send another reminder to [Russian President Vladimir] Putin that we’re not backing down”.
The US leader stressed that Mr. Putin “cannot wait us out, he cannot divide us, and we’ll be with Ukraine until they prevail in this war”.
President Zelensky thanked his American and other allies for their unwavering support.
And referring to the new security deal, he said: “It’s a truly historic day and we have signed the strongest agreement within Ukraine and the US since our independence [in 1991]”.
The G7 group of rich nations, Canada, France, Germany, Italy, Japan, the UK, and the US, have been important financial and military supporters of Ukraine as it battles to contain occupying Russian forces.
Other G7 leaders also hailed the $50bn loan deal, with UK Prime Minister Rishi Sunak describing it as “game-changing”.
The $50bn loan is a sizeable pot of money when compared with the $61bn worth of US military aid that was finally agreed in May.
Some of those in Kyiv, who had been pushing for this cash, had wanted the G7 to release the whole frozen fund of $300bn, not merely the interest it is generating. The European Central Bank had ruled that out.
Unlike the US aid package, which directly translated into more missiles being sent to the front line, this money will likely not arrive until the end of the year, meaning it will have little impact on the current course of the war.
For now, Ukraine says it still urgently needs more weapons – primarily air defense systems to blunt Russia’s missile and drone attacks on its cities and power stations, as well as long-awaited F-16 fighter jets, which it hopes will start arriving as early as this summer.
At the G7 summit, Mr Zelensky said the new security agreement included US shipments of those warplanes.
The loan deal is also hugely symbolic for Ukraine. Its aggressor is now being forced to pay, not only to repair the devastation it has wrought – but for Ukraine to defend itself.
One of Mr Zelensky’s closest advisers has said that the West’s decision to punish Russia in this way, in one sense, marks a turning point in the war.
However, the loan is unlikely to force a Russian U-turn on its war in Ukraine.
Most of the frozen assets of the Central Bank of Russia are being held in Belgium.
Under international law, countries cannot confiscate those assets from Russia and give them to Ukraine.
Several hours before the G7 decision was announced, Russian Foreign Ministry spokeswoman Maria Zakharova warned that there would be “extremely painful” retaliatory measures.
