FT: $ 20 bn US pledge boosts G7’s $ 50 bn loan package for Ukraine

The United States is expected to contribute up to $20 billion to a $50 billion loan package for Ukraine, organized by the G7 countries, according to three people familiar with the matter, FT says. This loan is set to be repaid using profits generated from frozen Russian assets, primarily held in the European Union.

As of now, €211 billion of Russian assets are frozen in Europe, with the majority held in Belgium and managed by the clearing organization Euroclear amid the ongoing Russo-Ukrainian war. In 2023, Euroclear generated €3 billion in profit from these funds.

According to FT, the negotiations over the loan structure have been ongoing for months and are accelerating, with G7 countries aiming to provide funding to Kyiv before the end of the year. The urgency is driven by concerns that if Donald Trump wins the US presidential election in November, Washington’s aid to Ukraine could be significantly reduced or cut off entirely.

FT says US officials indicated on 18 October to their G7 counterparts that Washington would provide the full original amount of about $20 billion. This decision comes despite previous expectations of a smaller contribution due to the EU’s inability to guarantee that Russian assets would remain immobilized for at least three years.

The EU has approved its own contribution of up to €35 billion to the G7 loan. Most of Russia’s frozen central bank assets, held in the EU, are expected to generate about €3 billion in profits annually. However, the EU’s contribution could be reduced if the US provides the full $20 billion.

The remaining portion of the $50 billion loan is expected to be provided by the UK, Canada, and Japan.

A potential hurdle in the negotiations has been Hungary’s veto on extending the EU’s sanctions regime against Russia. Despite this, US officials suggested that Washington’s full contribution would be possible even if the EU failed to convince Hungarian Premier Viktor Orbán to drop his veto.

G7 finance ministers are scheduled to meet in Washington on 25 October 2024, on the sidelines of IMF and World Bank meetings. They are expected to issue a statement detailing the loan distribution and structure, according to two sources familiar with the talks.

However, one person familiar with the negotiations cautioned that no definitive agreement had been reached yet, FT says. The US is still consulting with members of US Congress and Ukraine regarding the loan repayment terms.

Russian presidential spokesman Dmitry Peskov has repeatedly stated Russia’s strong opposition to the use of its assets to finance Ukraine, warning of Moscow’s plans to file lawsuits against those involved in this process. Currently, the discussion revolves around using the income generated from these funds rather than the funds themselves.

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