- US seeks European support for funding Ukraine with Russian assets
- Concerns over loan security and EU unanimity
- G7 summit aims for unity against Russia amid technical challenges
To secure the support of European allies for a proposal that will be presented at the G7 leaders summit later this week, US officials are attempting to leverage the interest from Russian suspended assets to assist war-torn Ukraine.
However, discussions are still in progress as the meeting in southern Italy commences on Thursday.
Certain European countries are not yet entirely persuaded of the United States-led proposal.
Immediately following the Russian invasion of Ukraine in February 2022, Western allies immobilized approximately $260 billion in Russian sovereign assets. The majority of that money is located within the European Union.
A US proposal to provide Ukraine with $50 billion in financing is one of the options currently being considered. This money would be repaid through the interest earned on Russian assets, which generate profits of up to $3.7 billion annually. However, there are complex logistical and financial challenges that must be addressed.
The United States seeks assurances regarding the security of the interest. The decision to suspend assets must be unanimously renewed every six months by all EU member states, which has heightened Washington’s concerns. If any EU government, such as Hungary, were to oppose the scheme due to its relations with Russia, the United States would be unable to repay the loan.
And if the belligerent parties convene at a negotiating table and Russia regains its assets, who would be responsible for the remaining portion of the loan? Is Moscow willing to make a payment? The EU and the Group of Seven (G7) countries are currently in the process of developing a plan for the eventual risk sharing.
The EU is divided into countries. Germany and France are sceptical, and the EU Commission and Council are also not entirely convinced.
A third source stated that there is political will to reach an agreement at the summit, even though technical issues must be resolved.
If these issues are not resolved by the summit’s conclusion, they stated that they would continue to make efforts to develop a method of communicating that negotiations are ongoing.
“This is a top priority for the United States.” Jake Sullivan, the national security adviser to US President Joe Biden, stated last week that “we believe it is a priority for the entire G7.” “We aspire to have all countries collaborate on a method to mobilize resources for Ukraine on a large scale, ensuring that they have the necessary resources to prevail in this conflict.”
Since the inception of the conflict, there have been numerous proposals regarding the disposition of the assets.
European countries have been reluctant to seize them unilaterally, despite the US’s initial insistence on doing so. A seizure of this magnitude would have been unprecedented in international law and would have undermined confidence in the euro as a global reserve currency.
Moscow has explicitly stated that any seizure would have been considered larceny.
In May, Russian President Vladimir Putin issued a warning shot by granting authorities jurisdiction over US-owned property in Russia to compensate for damages resulting from any future attempts to seize Russian assets.
The concept of a US loan was proposed as a potential compromise, despite the significant disparity in the amount of money between seizing the assets and utilizing their proceeds, which ranges from $260 billion to $50 billion.
Nevertheless, observers assert that a final agreement, or a demonstration of intent, would convey a powerful message of unity in opposition to Russia.
Marta Dassu, director of European affairs at the Aspen Institute think-tank and a former deputy minister of Italy’s foreign affairs office, stated, “The United States is interested in presenting this as a tangible outcome to the G7. Consequently, a deal will be reached, but it will be restricted and accompanied by thousands of conditions.”
Dassu stated that the Russian-Ukraine conflict is the primary focus of this year’s G7, which is being held in Europe. He also noted that the summit will have a significant political element in contrast to the traditional G7 themes, which typically concentrate on global economic governance.
Additionally, the November presidential elections in the United States are considered.
Before a potential shift in the White House administration that could have radical consequences for Ukraine should former US President Donald Trump prevail, this is the final G7 meeting.
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The most recent package of military aid to Ukraine, which was valued at $61 billion, was the subject of months of debate in the United States Congress. This indicates that, regardless of whether Biden is re-elected, there will be additional difficult negotiations regarding aid.
Ukraine is in dire need of Western assistance as the conflict continues for a third year in a row. The delay in the delivery of US military aid allowed Russia to make consistent territorial advances, for which Biden issued an apology.
On Thursday, President Volodymyr Zelenskyy of Ukraine will be in Puglia.
Kyiv’s forces were amid a counteroffensive at the most recent G7 summit, and they were still soliciting support. They were optimistic that this offensive would be instrumental in repelling Russian forces. However, the Ukrainian military is currently at a disadvantage, as Moscow is making steady progress in the east and north of the country.
Some observers believe that a $50 billion loan would guarantee Kyiv’s financing for 2025, irrespective of the outcome of the US election in November.
