G7 backs Biden's plan to loan $50B to Ukraine, using Russian-frozen assets

Ukrainian President Volodymyr Zelenskyy arrives at the Borgo Egnazia resort in Puglia for the G7 Summit hosted by Italy on June 13, 2024. [AFP]

The Group of Seven wealthy democracies announced Thursday that it would provide Kyiv with tens of billions of dollars in loans that will be paid back to Western allies using interest income from Russian assets frozen in Western financial institutions.

"We have reached a political agreement to provide additional financial support to Ukraine of approximately $50 billion by the end of the year,” said the summit host, Italian Prime Minister Giorgia Meloni.

The announcement came as the G7 leaders met at the luxury resort of Borgo Egnazia in Puglia, Italy, on the first day of their summit.

The announcement was a win for U.S. President Joe Biden. He had been pushing G7 leaders to agree to his plan to provide funds up front to help Ukraine in its fight against Moscow’s invasion.

The G7 deal is “another reminder to [Russian President Vladimir] Putin that we're not backing down,” Biden said Thursday evening during a joint press conference with Ukrainian President Volodymyr Zelenskyy. “In fact, we're standing together against his illegal aggression.”

Approximately $280 billion in Russian funds are frozen in Western financial institutions. Those funds are expected to generate interest income of at least $3 billion a year. The $50 billion loan will be paid back with that income for 10 years or more or until the loan is paid or Russia pays reparation.

The U.S. will not be part of a “lending syndicate” with other G7 members, a senior administration official told reporters traveling with Biden on Thursday.

Other G7 countries are expected to declare how much they’re willing to provide to Ukraine.

“The finance ministers are now going through the details - for example, topics of backstops that are necessary - and clarify this as soon as possible,” said Ursula von der Leyen, European Commission president. The EC is the executive body of the European Union.

Funds available in 2024

The administration official said that the U.S. is willing to front the full $50 billion if needed. The money can be made available “this calendar year” depending on how quickly Ukraine will be able to absorb it.

The U.S. Agency for International Development "has loan authority already established from Congress,” the official told VOA during the briefing for reporters. “There's not a set schedule that is required or a capped amount, but we have decided that we can provide up to $50 billion.”

The European Union in May had agreed on a less aggressive plan that would provide Ukraine with the interest income as it is generated annually.

Under EU rules, the sanctions regime that freezes the funds must be unanimously renewed every six months by the bloc’s 27 member states. The senior Biden administration official said that Germany, France, Italy, the European Commission and the president of the European Council - the EU members' heads of state - have committed to keep the funds frozen and will seek approval from the full membership of the EU.

Other requirements still need to be worked out, including adoption by the EU, as well as contracts between lenders, Ukraine and any intermediaries, the official added.

In April, Biden signed legislation to seize the roughly $5 billion in Russian assets that are frozen in U.S. financial institutions. The bulk of the frozen money, $190 billion, is in Belgium, and much of the rest is in France and Germany.

Much is still unknown about the plan. However, the U.S. goal is to have a leaders declaration at the end of the summit that lays out a “framework that is not generic, that is quite specific in terms of what it would entail,” White House national security adviser Jake Sullivan told VOA Wednesday.

Attending the summit for the second consecutive year, Ukrainian President Zelenskyy welcomed the deal’s passage.

US-Ukraine security agreement

On Thursday evening, Zelenskyy and Biden signed a separate bilateral security agreement outlining U.S. support for Ukraine.

The 10-year agreement says both sides will work together to build and maintain Ukraine’s credible defense and deterrence capability, strengthen Ukraine’s capacity to sustain its fight over the long term and achieve a just peace that respects Ukraine’s rights under international law, according to a White House fact sheet.

The agreement also says both sides will consult at the highest levels in case of any future Russian attack, and they will “accelerate Ukraine’s Euro-Atlantic integration, including through Ukraine’s implementation of reforms to its democratic, economic and security institutions in line with its EU accession goals and NATO’s program of reforms.”

Still Zelenskyy expressed concern about how much longer "the unity in the world will remain - the unity in the U.S., together with European leaders.” He was referring to the November U.S. election that could see former President Donald Trump, who has been skeptical of supporting Kyiv with military aid, back in the White House.

Zelenskyy said his country urgently needed additional air defense systems to protect Ukrainians and the nation’s infrastructure from Russia’s attacks. Biden promised to prioritize the transfer of existing Patriot air defense systems to Ukraine.

“We have acquired commitment from five countries so far for Patriot batteries and other air defense systems, as well as we've let it be known to those countries that are expecting from us air defense systems in the future that they're going to have to wait,” Biden said. “Everything we have is going to go to Ukraine until their needs are met, and then we will make good on the commitments we made to other countries.”