G7 leaders agree on $50B Ukraine loan using frozen Russian assets

Ukrainian President Volodymyr Zelensky was welcomed with open arms by Italian Prime Minister Giorgia Meloni at the G7 summit in Puglia today as world leaders agreed a new $50-billion loan for Ukraine using profits from frozen Russian assets. The emotional Zelensky, dressed his customary green fatigues, embraced the Italian premier as she welcomed them among the olive trees of the luxury Boro Egnazia resort to discuss prospects for Ukraine. The pair were joined by leaders from Britain, France, Germany, Canada and Japan for two days of talks in southern Italy spanning a range of issues including Ukraine, the Middle East, climate change and Africa.

‘The Group of Seven in recent decades has assumed an irreplaceable role in the management of global crises, especially those that jeopardize our freedom and our democracy,’ Meloni told an opening session as her counterparts arrived. As talks began, leaders announced their support for a huge new loan secured against future interest from some 300 billion euros (£253bn) of frozen Russian assets after months of gridlock – welcomed by Ukraine as a step in the right direction. The 300 billion figure has been floated for some time, though leaders in Europe had until recently shouldered much of the blame for not redirecting cash from frozen assets Ukraine’s way. Agreement on $50bn is considered a significant step forward after months of gridlock, with leaders in Europe divided over how – and whether – to repurpose seized assets for Ukraine’s benefit.

‘We have political agreement at the highest levels for this deal,’ a senior Biden administration official said on condition of anonymity. ‘And it is $50 billion this year that will be committed to Ukraine.’ Germany’s finance minister, Christian Lindner, also reacted positively to the announcement: ‘Good news from the G7: another $50 billion for Ukraine.’ He said it showed Russian President Vladimir Putin our ‘unity, greatly helps Ukraine and relieves the burden on budgets’ – but confirmed the details still needed working out. Rishi Sunak said a 50 billion US dollar support package for Ukraine that uses the profits of assets seized from Russia agreed by G7 countries is ‘game-changing’.

‘What we’re announcing is a game-changing package of support for Ukraine that will be funded from the G7, and it will be funded by the profits on the seized Russian assets,’ the Prime Minister told reporters at the summit in Puglia. It will be up to technical experts to work out the exact details of how the money can be used and when, though it is expected to be spread between military, economics, humanitarian and rebuilding priorities. US President Joe Biden’s national security adviser Jake Sullivan said the goal is ‘to provide the necessary resources to Ukraine now for its economic energy and other needs so that it’s capable of having the resilience necessary to withstand Russia’s continuing aggression’.

The loan is seen as something of a middle-ground between directly handing Ukraine the assets and offering Kyiv interest accumulated on the 300 billion sum. But Ukraine nonetheless welcomed the decision as something to break the deadlock. ‘Finally, we see the first step of fairness in making sure that the aggressor, and not the good people from countries that support us, are paying for Ukraine’s victory,’ said Kira Rudik, an opposition leader in Kyiv’s parliament. ‘We applaud this step. We hope that it is only the first of many more steps. And we will use this money wisely.’ Zelensky, who was due to hold a joint press conference with Biden later Thursday, has meanwhile been engaged in a flurry of diplomacy aimed at boosting international support.

He spoke earlier this week in Berlin at a reconstruction conference and is set to join more than 90 countries and organizations this weekend for a peace summit in Switzerland. Zelensky said he would sign two more security agreements with Japan and the United States in Puglia. The reopening of the Russian offensive in Kharkiv, Ukraine’s second largest city, has appeared to tip the balance for Western support in the last month, with donors allowing Ukraine to use their weapons against targets in Russia. Ukrainian officials in Kharkiv have said since that the green light has restored a degree of calm to the city.

Ukraine has also received substantial funding from the United States to help fend off the attack – only a matter of weeks since the $61bn lifeline passed at the end of April. Russia has, in turn, responded with threats against the West for the perceived escalation of the war. Putin has threatened ‘densely populated territories in the West with ‘grave consequences’ for lending materiel support to Ukraine. Repurposing Russian funds to give to Ukraine is similarly not without controversy. Kremlin spokesman Dmitry Peskov told reporters in December that Russia would challenge any confiscation in the courts.

‘If something is confiscated from us, we will look at what we will confiscate,’ Peskov said. ‘We will do this immediately.’ In the wake of Putin’s 2022 invasion of Ukraine, the United States and its allies prohibited transactions with Russia’s central bank and finance ministry, blocking around $300 billion of sovereign Russian assets in the West. Like other central banks, the Russian central bank placed some of its gold and foreign exchange reserves in liquid assets such as major currencies, gold and government bonds. About half of those reserves were held in the West. The United States previously proposed that working groups from the Group of Seven (G7) major industrialized nations explore ways to seize that money. EU countries say they could generate between 2.5 and 3.0 billion euros per year for Kyiv from the profits on the interest.

Speaking in the House of Lords in April, David Cameron, the Foreign Secretary, suggested allied powers in the West were close to a breakthrough. He assured that there was an ’emerging consensus’ between Western countries on how to use the assets, with the US endorsing a plan to borrow billions to send to Ukraine in loans against future interest on the Russian assets. Bill Browder, the CEO and co-founder of Hermitage Capital Management, told Radio 4 that issuing bonds on the future value of interest paid on the frozen assets was ‘just overly complicating matters’ and ‘not the right approach’. Dismissing the legal controversy around the seizure of such assets explicitly for Ukraine, he added: ‘I think it’s a political issue. Should the UK taxpayers be forking out money to Ukraine before Putin forks out the money? ‘And I think the answer is Putin should pay for it before we pay for it.’

Want more stories like this from the Daily Mail? Visit our profile page and hit the follow button above for more of the news you need.