G7 finance leaders to discuss Ukraine loan plan, longer freeze on Russian assets

G7 finance leaders to discuss Ukraine loan plan, longer freeze on Russian assets

By David Lawder

Finance leaders from the Group of Seven wealthy democracies on Wednesday will try to advance talks on harnessing the earnings from frozen Russian sovereign assets to back a $50 billion loan to Ukraine as the U.S. seeks more certainty, notably from the European Union, that the assets will be immobilized for the long term.

The talks will take place on the sidelines of a G20 finance leaders' meeting in Brazil focused on broader economic, climate and development issues.

A senior U.S. Treasury official told reporters that the G7 gathering was not likely to produce an agreement or statement, but it was important for finance ministers to pore over the technical details of the loan plan for Ukraine. However, EU member states' ambassadors were at the same time discussing options for meeting the U.S. concerns.

In June, G7 leaders agreed in principle to harness the earnings from some $300 billion worth of sovereign Russian assets, frozen since Moscow invaded Ukraine in 2022, to back a $50 billion loan to aid Ukraine and provide it with external funding certainty beyond this year.

The plan would not confiscate the assets, avoiding a precedent that the European Union has argued could destabilize the global financial system. But the details of the loan have proven more complicated to achieve than first anticipated.

The U.S. wants assurances that the assets would stay frozen for a long period - at least until there is a peace treaty that ends the war, preserves Ukraine's sovereignty and provides for Russia to compensate Ukraine for damage caused by the war, the Treasury official said.

This is somewhat at odds with the EU's Russia sanctions regime, which needs to be renewed every six months - leaving open the possibility that underlying assets could be released.

"We have been clear with our counterparts that we need solid assurances that the assets will not be re-mobilized in a way that would end the windfall profit stream, absent a peace deal ... where Russia pays for what it has done," the Treasury official said. "And so, from our perspective, something that makes that very clear would give us the security to make sure we know this loan could go through."

The official declined to say how this assurance could be accomplished, but said G7 leaders had determined that the loan plan must be made to work.

An EU draft document indicated that the EU members' ambassadors were discussing options for extending the renewal period of sanctions, specifically on the Russian central bank's assets, in order to secure the loan plan.

The options were either an "open-ended" extension of the renewal period or an expansion to up to three years. Unanimity among EU member states would be required in either case.

The draft said the extension would aim to "enhance legal certainty and predictability for G7 partners for the extraordinary revenue streams, which shall be made available to Ukraine to service and repay additional bilateral loans by the EU and G7 partners".