Two weeks after President Joe Biden reversed course and approved launching U.S. weapons into Russian territory, he and his closest allies are preparing for a different kind of attack, using proceeds from Russia’s own financial assets to aid Ukraine’s reconstruction.
For two years, the world’s largest Western economies have been debating what to do with $300 billion worth of Russian frozen assets that the Kremlin left behind in Western financial institutions after the 2022 invasion of Ukraine began.
Now, after a long-running dispute over whether the West can legally hand over those assets to Ukrainian President Volodymyr Zelensky’s government, the allies appear to be on the verge of reaching a compromise that will be held at the G7 summit in Italy announced on.
The Group of Seven, a group of the world’s richest large democracies, is close to agreeing to lend Ukraine about $50 billion to rebuild the country’s damaged infrastructure, but the loan will be made through frozen Russian assets. It will be repaid with interest, Western officials said. But experts say even this amount will only begin to have an impact on building a new Ukraine.
The funding announcement is part of a summit this week that will range from how to reverse Russia’s new momentum to how to achieve a ceasefire between Israel and Hamas. Biden’s national security adviser Jake Sullivan said Biden and Zelensky will meet on Thursday and sign a security deal.
“We want to show that the United States supports the people of Ukraine and that we stand with them and that this will continue to help meet their security needs, not just tomorrow but well into the future,” Mr. Sullivan told reporters aboard the Air Force, one of whom was speaking on condition of anonymity. On the way to Italy.
“By signing the agreement, we will also send a signal of our determination to Russia,” he added. “If Vladimir Putin thinks he can outlast the pro-Ukrainian coalition, he is wrong.”
During the summit, leaders will try to look beyond the current crisis, including a meeting between leaders and Pope Francis focused on harnessing the power of artificial intelligence.
The loan deal, coupled with a raft of new sanctions aimed at countering China’s efforts to reshape Russia’s defense industrial base, is the latest effort to bolster Ukraine and embarrass Russia at a dangerous moment in the 27-month conflict. part of the initiative.
Still, Europe is bracing for the possibility that former President Donald J. Trump, who has publicly vowed to withdraw from NATO, could rejoin when the organization next meets in 2025. Take power.
Biden faces the hurdle of convincing his allies, starting with Zelensky, that the United States plans to continue fighting Ukraine no matter what happens in November. Biden aides acknowledged severe delays in getting Congress to pass $61 billion worth of new munitions and air defense systems this spring, costing Ukraine lives, territory and tactical military advantage.
“I apologize for not knowing what was going to happen these weeks,” Biden told Zelensky in France last week, blaming congressional Republicans. “Some of our very conservative members have been holding out,” he said.
But the scale of the opposition in Congress also raises questions about whether this last infusion of a massive military program could be the last and threaten Biden’s claim as leader of the West who has rallied other allies to fend off further attacks. .
Now, with the war at a critical juncture, G7 leaders appear ready to end months of deliberations over how to use $300 billion in assets frozen by Russia’s central bank, mostly held in European financial institutions. The idea was to provide financial aid to Ukraine.
During a visit to Normandy last week, Biden appeared to persuade France, one of the last holdouts, to back the deal. At the end of the visit, French President Emmanuel Macron told reporters that he hoped “all members of the G7 will agree to provide a $50 billion solidarity fund for Ukraine.”
The Biden administration has been pushing for outright seizure of the assets after much internal wrangling. But the idea was rejected in Europe, where most of the funds are held, over concerns it would violate international law.
The EU did agree to provide Ukraine with about 3 billion euros a year, using the interest earned on Euroclear, a central securities depository in Belgium where most of the central bank’s assets are held.
But the Biden administration wants to get more money to Ukraine up front and has developed a plan to use the interest to back loans that the U.S. and other G7 countries can provide immediately.
The loan could be as much as $50 billion and would be repaid over time and generate so-called windfall profits from Russian funds.
In recent weeks, G7 finance ministers have been grappling with the complex details of how such loans would work, but several outstanding questions remain to be answered. Officials have been trying to determine how to actually move the money to Ukraine and have discussed working it through institutions such as the World Bank as an intermediary.
It is unclear how the loan will be repaid if the war ends before the bonds mature or if interest rates fall so that asset returns are insufficient to repay the loan.
John E. Herbst, Unlocking these assets is critical for the G7, especially in the wake of gridlock in Congress and delays in U.S. funding for certain weapons to Ukraine, said senior director of the Atlantic Council’s Eurasia Center and a former U.S. ambassador to Ukraine.
“It is commendable that the administration moved quickly to provide assistance to Ukraine after Congress acted,” he said. “But we’re still slow to get Ukraine the right weapons systems it needs, especially now. This is not just a failure of the United States; it’s a failure of the United States. It’s a failure of the entire alliance.
Evelyn Farkas, executive director of the McCain Institute at Arizona State University, said the unfreezing of frozen assets would be a “game changer.” Internally, he serves as deputy assistant secretary of defense for Russia, Ukraine and Eurasia.
Farkas said the U.S. delay may have “focused Europe’s attention” and made European countries think: “Well, we have to come up with an alternative because the United States is not reliable.”
“Hopefully they can stay focused,” she said.
Ellen Rapeport Contributed reporting.
