BRUSSELS – European Union finance ministers are slated to convene via videoconference on Wednesday to deliberate on a proposal originating from the G7. The proposal aims to utilize Russian central bank assets, currently immobilized in Western countries, to facilitate a substantial loan for Ukraine, estimated at around $50 billion.
While the precise size of the loan remains under discussion within the EU, U.S. Treasury Secretary Janet Yellen referenced the $50 billion figure following a recent G7 finance ministers’ meeting in Italy.
The proposed mechanism entails raising funds for Ukraine through a bond, potentially backed by the annual windfall profits generated by the approximately $300 billion worth of Russian central bank assets frozen in Western nations since Moscow’s invasion of Ukraine in February 2022.
Although the legal complexities surrounding the direct seizure of these assets pose challenges, European officials view leveraging the profits generated by them as a viable option, given that these profits are not legally owned by Moscow.
Key considerations for the EU include the feasibility of providing a concessional loan to Ukraine based on future revenue streams from the frozen Russian assets. European governments have already agreed to channel annual profits from these assets, totaling 2.5 to 3 billion euros, towards a special fund for Ukraine’s defense and reconstruction efforts.
However, endorsing the proposal to leverage these profits for an upfront loan would necessitate amendments to prior decisions regarding the allocation of these funds.
Additionally, questions remain regarding the issuance of the bonds to raise the desired funds. Should it be spearheaded by the United States and other G7 nations, or should the EU take the lead, given its substantial holdings of the immobilized assets?
Potential implications of EU involvement in issuing the bonds include navigating issues of joint responsibility for the debt, a matter that some member states, notably Germany, have traditionally approached with caution.
While concrete outcomes from the videoconference are not expected, it serves as a crucial opportunity to gauge consensus ahead of the upcoming G7 leaders’ summit in Italy, where the matter of Russian assets will be prominently featured on the agenda.