US ready to lend $50bn to Ukraine, to be repaid with profits from frozen Russian assets if the EU extends sanctions against Moscow indefinitely. This is reported by the Financial Times, citing a leaked document from the discussion.
Washington needs the EU to extend the bloc's sanctions on Russian state assets, which expire every six months unless renewed by unanimous consent, until the end of the war to ensure the US is not left behind to hang on the hook for payout. However, such a decision needs the approval of European leaders, including Hungarian Prime Minister Viktor Orbán, who often opposes sanctions against Russia.
The US proposal is outlined in an EU discussion paper seen by the Financial Times, prepared for a virtual meeting of the bloc's finance ministers to discuss fundraising for Kiev. Washington is pushing for a deal ahead of next week's G7 leaders' summit in Italy, where a financing mechanism backed by profits from frozen assets is expected to be at the center of support for Ukraine.
The main option under consideration is a US plan to lend money to Ukraine, possibly in tandem with other G7 countries, roughly matching the projected "windfall" of hundreds of billions of dollars in frozen Russian assets held in the west. Diplomats say it could raise as much as $50 billion. Details of the loan, including its maturity, interest rate, whether it will be provided directly or through an intermediary such as the World Bank, remain to be determined.
But Washington sees any such loan as "conditional". It depends on how the EU distributes the proceeds of the repayment assets and ensures that Russian central bank assets held in the EU remain frozen until Russia agrees to pay for the damage caused to Ukraine.
Most of Russia's assets are held in the Belgian central securities depository Euroclear, generating approximately €3 billion in annual profit.
Some EU governments are wary of the potential financial implications of such a move. The Americans will likely have to accept that the EU cannot guarantee the losses, said a person briefed on the talks.
Another option under consideration would involve the EU, along with other G7 countries, effectively making bilateral loans to Ukraine secured by profits from Russian assets frozen in their own jurisdiction. This would potentially require the EU to use a "free space" within its overall budget, a step that would also require unanimous consent. The time required to put such safeguards in place, together with legal and operational constraints, would not facilitate rapid implementation of this option.
Pressure to use the assets has increased in recent months as Washington seeks to maximize financial aid to Kiev ahead of presidential elections in November. While France, Germany and Italy are members of the G7, decisions taken by the EU require consensus among its 27 members.