Two weeks after President Biden reversed course and approved firing U.S. weapons into Russian territory, he and his closest allies are preparing a different kind of assault, using the proceeds of Russia’s own financial assets to help rebuild Ukraine.
For two years, the world’s largest Western economies have been debating how to manage the $300 billion in frozen Russian assets that the Kremlin left in Western financial institutions after the invasion of Ukraine began in 2022.
Now, after lengthy debates over whether the West could legally hand over these assets to Ukrainian President Volodymyr Zelensky’s government, the allies appear close to reaching a compromise, which will be announced at the G7 summit. in Italy.
The Group of Seven, which includes the world’s richest major democracies, is set to grant Ukraine a loan of around $50 billion to rebuild the country’s devastated infrastructure, with the understanding that the loan will be repaid by interest earned on frozen Russian assets. , Western officials said. But even this amount, experts say, would only begin to hinder the construction of a new Ukraine.
The funding announcement will be just part of a summit this week that will range from how to reverse Russia’s new push to how to achieve a ceasefire between Israel and the Hamas. Mr. Biden and Mr. Zelensky will meet on Thursday and sign a security agreement, said Jake Sullivan, Mr. Biden’s national security adviser.
“We want to demonstrate that the United States supports the Ukrainian people, that we stand with them, and that this will continue to help meet their security needs, not just tomorrow, but into the future,” Mr. Sullivan to reporters aboard the Air Force. One on the way to Italy.
“By signing this, we will also send a signal to Russia of our determination,” he added. “If Vladimir Putin thinks he can survive the coalition that supports Ukraine, he is wrong.”
There will be moments during the summit where leaders attempt to look beyond the current crises, including a meeting between leaders and Pope Francis focused on harnessing the power of artificial intelligence.
The loan agreement, combined with a a series of new sanctions aimed at countering China’s efforts to rebuild Russia’s defense industrial base, are part of the latest efforts to strengthen Ukraine and hobble Russia at a perilous moment in a 27-month-old conflict.
Still, Europe is bracing for the possibility that former President Donald J. Trump, who has openly talked about withdrawing from NATO, will be back in power when the group next meets, in 2025. And several leaders present – including British Prime Minister Rishi Sunak and French President Emmanuel Macron face elections that could redefine Europe.
Mr. Biden faces the obstacle of convincing his allies, starting with Mr. Zelensky, that the United States plans to stay in the fight against Ukraine, whatever happens in November. Significant delays this spring in Congress’s passage of $61 billion for new munitions and air defenses, Mr. Biden’s aides acknowledge, have cost Ukraine lives, territory and a tactical military advantage.
Mr. Biden told Mr. Zelensky last week in France that “I apologize for the weeks we spent not knowing what was going to happen,” and placed the blame on congressional Republicans. “Some of our very conservative members have delayed the process,” he said.
But the scale of opposition in Congress has also raised questions about whether this latest injection of a major military program could be the last, and threatens Mr. Biden’s claim as a Western leader who has rallied the rest allies to repel further aggression from the United States. President Vladimir V. Putin.
Now, as the war comes to a critical juncture, Group of Seven leaders appear ready to end months of deliberations over how to use the Russian central bank’s $300 billion in frozen assets , which were largely kept in European financial institutions. The idea is to provide economic aid to Ukraine.
During a trip to Normandy last week, Mr Biden appeared to have persuaded France, one of the last holdouts, to support the deal. At the end of the trip, French President Emmanuel Macron told reporters he hoped “All G7 members will accept a $50 billion solidarity fund for Ukraine.”
The Biden administration, after much internal wrangling, had pushed to seize the assets outright. But the idea failed in Europe, where most of the funds are held, over fears it would violate international law.
The European Union has agreed to use interest earned on central bank assets where most of them are held – at Belgium’s central securities depository, Euroclear – to provide Ukraine with around $3 billion. euros per year.
But the Biden administration wanted to provide more funds to Ukraine from the start. So she devised a plan to use that interest to secure a loan that the United States and other Group of Seven countries could provide immediately.
The loan could reach $50 billion and would be repaid over time through so-called windfall profits generated by Russian money.
In recent weeks, Group of Seven finance ministers have attempted to iron out the complex details of how such a loan would work, with several questions remaining unresolved. Officials tried to determine how the money would actually be transferred to Ukraine and discussed transferring it through an institution such as the World Bank.
It is unclear how the loan would be repaid if the war ended before the bond matured or if interest rates fell, making the proceeds from the assets insufficient to repay the loan.
John E. Herbst, senior director of the Atlantic Council’s Eurasia Center and former US ambassador to Ukraine, said the release of assets was of paramount importance to the Group of Seven, especially after congressional impasse and state delays -United to supply Ukraine with certain weapons.
“The administration was quick to provide aid to Ukraine after Congress’ decision, and that is to its credit,” he said. “But we are still slow to provide Ukraine with what it needs in terms of an adequate weapons system, especially at this time. This is not just an American failure; It’s a failure of the entire alliance.”
Unfreezing frozen assets “would be a game changer,” said Evelyn Farkas, executive director of the McCain Institute at Arizona State University, who previously served as deputy secretary of defense for Russia, Ukraine and Eurasia under President Barack Obama.
Farkas said the US delays have probably “focused the European mind”, making European countries think: “OK, we have to find alternatives because the US is unreliable.”
“I hope they stay focused,” she said.
Alan Rappport reports contributed.