Leveraging Russia’s Frozen Assets for Ukraine
The European Union plans to raise €35 billion in loans for Ukraine by tapping into profits generated from Russia’s frozen assets. As the war nears its 1,000th day, this initiative will provide crucial financial support to keep Ukraine’s government, economy, and defense functioning. EU Commission President Ursula von der Leyen emphasized during her visit to Kyiv that this loan will offer Ukraine much-needed fiscal flexibility for essentials like healthcare, defense, and infrastructure repairs.
The Origin of the Idea: “Make Russia Pay”
The idea of using Russia’s frozen assets stems from the West’s 2022 slogan, “Make Russia Pay,” aimed at holding Moscow accountable for the devastation caused in Ukraine. While Russia ignored these demands, EU leaders saw an opportunity to use the frozen foreign exchange reserves—worth €270 billion—to fund Ukraine. Although international law prevents confiscating these assets, the profits they generate can be legally accessed and used for Ukraine’s aid.
The EU’s Role in the G7 Loan Initiative
This €35 billion loan is part of a broader $50 billion G7 plan to support Ukraine. Initially, the EU was supposed to contribute €18 billion, but due to delays and concerns from the US about the EU’s sanction renewal process, von der Leyen decided to offer a larger sum to push negotiations forward. This move aims to encourage swift action from allies, especially as Ukraine’s situation worsens ahead of winter.
How the Loan Will Be Managed
The EU will establish the Ukraine Loan Cooperation Mechanism to manage the loan’s windfall profits. Allies contributing to the loan can tap into this mechanism to cover repayment costs, including principal and interest, meaning neither Ukraine nor G7 countries will bear the financial burden. The funds will be disbursed gradually, giving Ukraine flexibility in using the money for both military and civilian needs.
The Challenge of Hungary’s Veto
A potential roadblock to this plan is Hungary, which has veto power over the renewal of sanctions on Russia. While the loan itself is not subject to a veto, a proposal to extend the sanction renewal period from six to 36 months could be hindered by Hungary’s objections. Despite this, the EU intends to move forward with the €35 billion loan, ensuring that Ukraine continues receiving financial support as long as sanctions remain in place.
SOURCE: Ref Image from Ukrinform
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