What’s stopping the West from giving Kyiv $50 billion from frozen Russian assets?
On September 20, during her visit to Kyiv, European Commission President Ursula von der Leyen announced that Ukraine would receive EUR 35 billion as part of the previously announced "reparations loan" secured by proceeds from frozen Russian assets.
Read more to understand the difficulties the West faces in granting Ukraine this loan from Russian assets in the article by Ivan Horodysky, Director of the Dnistrianskyi Center – Slow unfreezing: why the plan to loan Ukraine funds secured by Russian assets is being hampered.
The decision of the Group of Seven in July 2024 at the Puglia summit to provide a USD 50 billion "reparations loan" to Ukraine, to be repaid from the proceeds of the frozen reserves of the Central Bank of Russian Federation, was a real breakthrough.
This is especially important for the USA, which is expected to make the largest contribution of about USD 20 billion, with the same amount planned by the EU and the rest by the UK, Canada, and Japan.
Only a few months earlier, the EU had decided to use the proceeds from these assets in the interests of Ukraine (about USD 3 billion a year), and this loan was a guarantee of financial support for Ukraine in the face of war for at least the next year.
It is known that the largest share of reserves of the Central Bank of Russian Federation – approximately USD 210 billion – is blocked in the EU in two clearing institutions: Euroclear in Belgium and Clearstream in Luxembourg. Currently, sanctions in the form of blocking Russian assets are renewed by the European Union unanimously every six months.
The Group of Seven countries understandably want to have guarantees that these sanctions will not be lifted at some point.
This means that there will be no risks to the return of the funds they have allocated.
Both Hungary and Slovakia, as well as other EU member states, may veto the decision to continue blocking the reserves of the Central Bank of Russian Federation, depending on the political situation and legal circumstances.
It is to Brussels' credit that almost immediately after the G7 decision, European institutions began working on solving this problem.
In September, the European Commission presented two main options to the ambassadors of the member states, which had been previously agreed with the USA: a five-year block on Russian reserves, reviewed every 12 months with the support of a qualified majority, or a 36-month extension with a unanimous vote.
The final decision, or at least its consideration, can be expected at the next meeting of the European Council, which will take place on October 17–18 in Brussels.
However, the speed of resolving this issue is influenced by another global factor – the United States presidential election.
The risk of Trump winning the elections has accelerated efforts to finalise this aid package to ensure support for Ukraine regardless of the outcome of the US presidential election.
When Kamala Harris unexpectedly entered the presidential race instead of Biden, the process slowed down. As Politico noted, the rise of the Harris USA presidential candidate's ratings raised hopes for her victory and slowed the pace of preparations.
Yet, all the twists of recent weeks and the fact that Harris hasn't pulled far ahead of her Republican opponent seem to have restarted the process, with an agreement expected soon.
Meanwhile, since the outcome of the US election is unpredictable, the statement of Ursula von der Leyen in Kyiv about a significantly larger share of the EU – EUR 35 billion – was probably intended to demonstrate the EU's commitment to the current plan regardless of the USA decision. Even before her visit to Kyiv, there were reports of an EU plan "B", according to which the share of blocked reserves could reach as much as 40 billion.