West ready to channel $50B Russian interest to aid Ukraine
12:06 PM EDT, May 21, 2024
The West is close to allocating $50 billion to Ukraine from the interest generated by frozen Russian funds, primarily in Europe. This is thanks to an increasingly accommodating Germany, which had previously distanced itself from using Kremlin resources. The decision on this matter may be made at the next G7 meeting.
According to Bloomberg, Germany is ready to support the US plan to use future revenue generated from frozen Russian assets—mainly located in Europe—to aid Ukraine. This could amount to up to $50 billion.
Striking Putin with his own money. The West has a plan
The US has been working for months on ways to use Russian assets to help Ukraine. Recall that in February 2022, the G7 countries froze about $280 billion of the Russian central bank. Most of these funds are in Europe, in the Belgian Euroclear clearinghouse. Options previously considered for seizing Moscow's money included transferring all funds directly to Ukraine, securing them to issue bonds, or using them as collateral for various loans.
However, these proposals did not meet with enthusiasm in several European countries. "The governments of France and Germany expressed concerns about the impact of such moves on financial stability and the attractiveness of the euro as a reserve currency, as well as their legality," Bloomberg notes.
According to the portal, the latest US proposal was received more positively in European capitals, including Berlin, as it only involves using the interest generated by the assets without seizing the entire principal.
A decision is imminent
"Germany's consent could be a crucial step that brings Washington and its allies closer to providing a new, significant aid package for Kyiv and ensuring US commitment regardless of the outcome of the November presidential elections," Bloomberg reports.
US and EU officials claim that this issue is set to dominate discussions among finance ministers and central bank heads from G7 countries, who will meet in Stresa, Italy, at the annual meeting starting this Thursday.
However, German officials do not expect any final agreement before the G7 leaders' meeting from June 13-15, the portal reports.
The EU looks favorably on Kyiv
In mid-May, the European Union positively assessed the reform and investment plan of the government in Kyiv, paving the way for the start of regular payments to Ukraine from a €50 billion support package.
This concerns the so-called "Plan for Ukraine," which outlines the Ukrainian government's intentions for economic recovery, reconstruction, modernization, and reforms it plans to carry out as part of the EU accession process over the next four years.
On Tuesday in Brussels, EU finance ministers positively assessed this plan, giving the green light for regular payments from the €50 billion macro-financial support package for Kyiv approved by the EU's "27." The planned reforms and investments were considered to stimulate economic growth, ensure macroeconomic stability, improve the fiscal situation, and support Ukraine's integration with the EU.
This is an important step towards providing very much needed, regular, and predictable financial support for Ukraine's reconstruction and modernization over the next four years, said Vincent van Peteghem, Belgium's finance minister, who chaired the ministers' meeting.
The financial support will be contingent on the Ukrainian authorities' respect for democratic mechanisms, including a multi-party parliamentary system, and human rights. The aid also depends on strengthening the rule of law, maintaining judicial independence, enhancing public administration reform, combating corruption — particularly high-level corruption — and money laundering.
The plan has mutual benefits
Regular payments will be made to Ukraine upon meeting subsequent stages of reforms. So far, of the €50 billion, Ukraine has received €6 billion in bridge financing.
The EU estimates that full implementation of all proposed reforms and investments could grow Ukraine's GDP by 6.2% by 2027 and 14.2% by 2040, potentially reducing debt by about 10 percentage points of GDP by 2033.
On Tuesday, EU ministers also extended the mandate of the EU advisory mission for civilian security sector reform in Ukraine until 2027. EU experts advise and train Ukrainian Ministry of Internal Affairs employees and police officers. The mission also assists Ukrainian authorities in investigating and prosecuting crimes committed during Russia's aggression and in border management.
