According to a statement from the French presidency on Wednesday, G7 leaders have reached a consensus to allocate $50 billion for war-torn Ukraine before the end of the present year.
The Russian frozen assets will be used as a source of these funds.
France’s president…just ahead of tomorrow’s G7 summit in Italy that aims to support Kyiv against Russia. The United States has proposed lending Ukraine up to $50bn, using interest on some of €300bn ($325bn) worth of Russian central bank assets currently frozen by the G7 and the EU following Russia’s invasion of Ukraine as collateral.
How is it possible?
In addition, both EU and Groupe de sept (G7) have put a freeze on approximately 300 billion euros worth of Russian central bank assets and private properties such as yachts,and real estates amongst others which belong to oligarchs near Putin. According to Ukrainian think tank Institute for Legislative Ideas, these properties totalled at $397 billion; whereas World Bank has estimated that rebuilding this country after war will cost more than $486 billion.
The US initially called for direct seizure of Russian assets but later agreed with European Union leaders’ plan that suggested payments made with interest generated by them.
Among them, around 185 bn euros were held by Euroclear – an international clearing house settled in Belgium – making Europe pivotal in determining whether or not and how blocked assets are to be deployed. Britain Austria Japan Switzerland hold other parts.
Nevertheless western countries cannot seize money belonging to the Central Bank of Russia under international law, therefore early last month EU states agreed instead to take away any interest earned on these accounts ranging between 2.5-3bn Euros annually. Similarly, at end May the ministers also committed themselves in principle in case this scheme worked out by front-loading their fund through anticipated future profits obtained from freezing diaries without providing details about how it would work.
What are they?
For example, how would the debt be issued? Initially, it had been suggested that only the US could extend a loan but this is now being seen as an opportunity for other G7 nations to cooperate on risk-sharing.
The plan has several challenges including a requirement for all EU countries to agree unanimously to renew sanctions against Russia every six months.
Moreover, what happens if peace comes and the assets are unfrozen? At the same time there exists a threat of third countries like China reducing their investments in the West because they may lose them due to confiscation of assets.
Putin signed a decree last month permitting seizure of property belonging to either Americans or persons “connected” with them.
