European Union finance ministers will hold a videoconference on Wednesday on a G7 proposal to leverage Russian central bank assets immobilised in the West to allow Kyiv swiftly to receive a loan of around $50 billion, senior euro zone officials said.
The size of the loan has not yet been agreed in the EU, the officials said, but the $50 billion was mentioned by U.S. Treasury Secretary Janet Yellen as a possible amount after a meeting of Group of Seven finance ministers on 23-25 May in Italy.
The idea is that the money for Ukraine, struggling to buy weapons to fend off the Russian invasion, would be raised through a bond that could be backed by annual windfall profits generated by the $300 billion of Russian central bank assets frozen in the West after Moscow’s attack on Ukraine in February 2022.
European officials have said that, while seizing the capital of the assets would be legally very risky, using the profits generated by the frozen capital is fine because the profits do not legally belong to Moscow.
“There is a lot of uncertainty about the potential modalities, but the key issue on the table is whether the EU would be open to some sort of concessional loan to Ukraine, based on future revenue stream from the frozen Russian assets,” one senior euro zone official said.
European governments have already agreed to transfer profits of 2.5 to 3 billion euros ($2.7-3.3 billion) per year generated by the Russian assets to a special fund that would finance the purchase of weapons and also reconstruction of Ukraine.
If the EU were to agree to using the profits as a leveraging tool to get more money up front, as proposed by the United States, it would have to amend its decision to spend the cash on weapons and reconstruction.
“In practice, that would mean changing for 2025 and beyond the recently adopted decision on windfall profits in EU. There would also be potential changes to the EU sanctions regime when it comes to the assets,” the senior euro zone official said.
Officials said that another open issue was who would issue the bonds to raise the money: should it be the United States and other G7 countries, or should be it be the EU, which has holds by far the biggest amount of the immobilized assets.
For the EU to agree to issue the bonds, either alone or as part of a G7 consortium, would likely open a tricky question of joint responsibility for the debt, something that some, like Germany, normally strongly oppose.
“I do not expect any concrete outcome after the video-teleconference. I see it more like a check of temperature before next week’s G7 leaders’ summit,” the senior official said.
Leaders of the United States, Canada, Japan, Britain, Germany, France and Italy – the G7 – are set to meet in Italy on June 13-15 and the issue of the Russian assets is on their agenda.