US President Joe Biden aims to persuade the leaders of the world’s seven richest economies about a plan that could potentially provide up to $50 billion in loans for Ukraine’s war effort, using frozen Russian asset interests in Western financial institutions.
The American leader wants his G7 counterparts to endorse the plan at their next summit in Apulia, Italy, starting June 13. But before the G7 partners can join, many of the details of the plan must first be worked out, he acknowledged to the Voice of America a source familiar with Biden’s plan. If an agreement is reached, the loan could be disbursed within the next few months at the latest.
Most of the roughly $280 billion in Russian assets frozen by Western financial institutions following Moscow’s invasion in 2022 are located in Europe, most of it in Belgium, France and Germany.
In April, Biden signed legislation allowing Washington to seize the roughly $5 billion in Russian assets that had been tied up in U.S. financial institutions.
Resisting pressure from the United States and Ukraine to seize the assets outright, EU officials agreed in May to a more restricted plan of using only the interest generated by these assets, roughly $3 billion a year or more.
But the Biden Administration is pushing for a more aggressive plan. In simple terms, Western allies will advance a loan of up to $50 billion to Ukraine, which will be repaid using interest income from the assets in the coming years.
If it were not the G7, the United States – possibly with other allies, including Canada, the United Kingdom, Japan and the European Union – would issue the loan jointly and would be entitled to a portion of the interest generated by the assets, the source said. .
Details of the plan remain unclear as intensive diplomacy continues to hammer out legal and technical requirements. But G7 finance ministers broadly agreed to support the principles of the plan during their May meeting.
The group’s discussions have focused on what can be done to unlock the value of the Russians’ frozen assets for the benefit of the Ukrainian people, said US Treasury Undersecretary Wally Adeyemo.
“They talked about a number of options that will allow us to make sure that Ukraine has access to the money it needs not only to invest in the economy but also in defense,” Adeyemo told the VOA. “And my expectation is that when we get to the leadership meeting, they will support some of those options.”
The push is partly due to the situation on the battlefield, where Moscow’s forces have made strategic advances north and northeast of Kharkiv, Ukraine’s second-largest city. Russia has also stepped up attacks along the eastern front.
The reluctance of American taxpayers to finance the war is another determining factor. Although the US Congress agreed to a $61 billion aid package for Ukraine in April, Republican opposition had stalled its approval.
In his Friday meeting with Volodymyr Zelenskyy in Paris, on the sidelines of D-Day celebrations in France, Biden apologized to the Ukrainian president for “those weeks of not knowing what was going to happen, in terms of funding,” blaming “members very conservative who were holding him back.” Thus, he promised to continue supporting kyiv’s war efforts.
But as other G7 countries face the same fatigue among their constituents over war funding, Biden began working with allies and partners to make Russia pay instead of burdening taxpayers, in a way that maintains unity without crossing no country’s red lines, the source said.
While there is general agreement to give Ukraine as soon and as much as possible, there are challenging legal and regulatory implications for providing loans based on anticipated returns on frozen assets, said Kristine Berzina, managing director of Geostrategy at the think tank on German funds.
“How can they be lent against the expected earnings of the assets, how does that fit into the existing sanctions regime and for how long will those assets actually be frozen?” pointed to the VOA as the key issues at stake. “How can you ensure that the Europeans do not change the sanctions that freeze these assets before the 50 billion are provided?”
Moscow has threatened retaliation. In May, President Vladimir Putin signed a decree that would require Russia to identify U.S. property, including securities, that could be used as compensation for losses suffered as a result of any seizure of Russian assets frozen on U.S. soil.
While some Western countries may be concerned about the threat, others are concerned about the precedent of using assets frozen under international law.
Biden will seek to allay those fears when he meets with G7 leaders next week. It faces many challenges, including what will happen in the European Parliament this weekend: there hundreds of millions of voters from 27 countries could help decide the continent’s struggle between unity and nationalism, as well as determine the fate of the European support for Ukraine.
[La periodista de de VOA, Oksana Bedratenko, contribuyó a este informe]
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