What’s stopping the West from giving Kyiv $50 billion from frozen Russian assets?
On 20 September, European Commission President Ursula von der Leyen during her visit to Kyiv announced the allocation of €35 billion to Ukraine as part of a previously announced "reparations loan" backed by income 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 defrosting: Why the plan to fund Ukraine with frozen Russian assets is stalling.
The decision by the G7, made at the Apulia Summit in July 2024, to provide Ukraine with a $50 billion "reparations loan," to be repaid using income from the frozen reserves of Russia’s Central Bank, was a real breakthrough.
It is expected that the US will contribute the largest share (around $20 billion) with the EU planning to contribute the same amount and the remainder coming from the UK, Canada and Japan.
The plan is to repay the funds through income generated from these frozen Russian assets (about $3 billion annually).
The largest share of the Central Bank of Russia's reserves (around $210 billion) is currently frozen in two clearing institutions within the EU: Belgium’s Euroclear and Luxembourg’s Clearstream. The sanctions freezing these Russian assets are renewed unanimously by the European Union every six months.
The G7 countries, understandably, want guarantees that these sanctions won’t be lifted at some point.
This is crucial to ensure there are no risks to the repayment of the funds they have allocated.
Hungary, Slovakia and other EU member states, depending on political and legal circumstances, could potentially veto the extension of the freeze on the Central Bank of Russia’s reserves.
Credit should be given to Brussels, which began addressing this issue almost immediately after the G7’s decision.
In September, the European Commission presented two main options to the ambassadors of member states, which had been preliminarily agreed upon with the US: a five-year freeze on Russian reserves with a review every 12 months, requiring a qualified majority vote, or a 36-month extension requiring unanimous agreement.
A final decision or at least a discussion on the matter is expected at the next European Council meeting, which is set to be held on 17-18 October in Brussels.
However, another global factor is influencing the speed of resolving this issue – US elections. 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 reported, the rise in Harris' ratings brought hope for her victory and reduced the urgency of the 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 European Commission announced a significant increase in the EU’s contribution to Ukraine – up to €35 billion. Even before von der Leyen's visit to Kyiv, it was reported on an EU "Plan B" that could raise the Union's contribution to as much as €40 billion.