Authored by RFE/RL via OilPrice.com,
The European Union and the Group of Seven (G7) leading industrialized nations are slowly gearing up new legislation that will allow a $50 billion loan to go to Ukraine by the end of the year.
The political decision for that loan was already agreed when the G7 met in Italy for its annual summit on June 13-15. In the communique from the meeting, it was stated that “we decided to make available approximately $50 billion leveraging the extraordinary revenues of the immobilized Russian sovereign assets, sending an unmistakable signal to President Putin.”
There are roughly $282 billion worth of Russian frozen assets in G7 countries after these resources were targeted by sanctions in early 2022, mostly in the EU. And while no one is keen yet to face the legal consequences of actually confiscating the money -- as fears persist it could dissuade other countries from investing in the eurozone and thus undermine the euro -- there is momentum now to get creative in using the funds to financially support Kyiv.
The G7 declaration stated as much by noting that “Russia must end its illegal war of aggression and pay for the damage it has caused to Ukraine. These damages now exceed $486 billion, according to the World Bank. It is not right for Russia to decide if or when it will pay for the damage it has caused in Ukraine. Russia’s obligations under international law to pay for the damage it is causing are clear, and so we are continuing to consider all possible lawful avenues by which Russia is made to meet those obligations.”
Most Russian money located in the EU, the onus is on Brussels. EU leaders, including more Ukraine-skeptic nations such as Hungary and Slovakia, endorsed the G7 outcome at a summit in Brussels just a week after. They unanimously agreed on conclusions that urged the European Commission to take the work forward on this and added, “Subject to EU law, Russia’s assets should remain immobilized until Russia ceases its war of aggression against Ukraine and compensates it for the damage caused by this war.”
It should be recalled that the bloc already has a mechanism in place to send the annual windfall profits from the frozen Russian assets to Ukraine. This is estimated to generate some 3 billion euros a year ($3.2 billion), with 90 percent of it going to military equipment and the rest for reconstruction.
The first tranche of this money was disbursed over the summer.
This new G7 initiative, however, goes a step further, bringing the interest proceeds from frozen assets via a loan that is guaranteed by the G7 countries.
The preliminary division is that the EU and the United States will back this up with $20 billion each, and Japan and the United Kingdom will guarantee the remaining $10 billion between them. But a lot of nitty-gritty legal groundwork is still needed.
The EU and NATO are still on the beach this week, but look out for two interesting visits on August 21. First German Chancellor Olaf Scholz is due in Chisinau in what is a symbolic show of solidarity from the EU’s most powerful member state to Moldova, which will hold a crucial presidential vote later this autumn and a referendum on whether the country should aim to join the EU.
That same day Indian Prime Minister Narendra Modi is due in Warsaw and will travel to Kyiv from there. The West has attempted to woo India for a long time and is hoping the country will be more vocal and practical in its support for Ukraine and opposition to Russia’s invasion.