US proposes to use profits from frozen Russian assets to help Ukraine

The United States has offered to raise tens of billions of euros as a loan to Ukraine, secured by future profits from Russian state assets frozen by Western countries.

This is reported with reference to the Financial Times.

The G7 countries are divided over what to do with 260 billion euros worth of Russian assets frozen by Western countries after Moscow launched a full-scale invasion of Ukraine in February 2022.

Washington has supported the idea of confiscating all reserves and transferring them to Ukraine, while European officials fear that this idea could violate international law and destabilize financial markets. EU countries would prefer to transfer to Kyiv only the profits earned on the underlying assets. But the question of using Russian reserves to help Kyiv has become more pressing in recent months as the war enters its third year and additional US aid to Ukraine is delayed in Congress.

"We are at a point where we need to explore all possible ways to maximize the value of immobilized reserves for Ukraine. We can't wait forever, we know that," said Dalip Singh, Deputy National Security Advisor for International Economics.

He added that the US proposal involves transferring "the present value of the future interest stream on the immobilized assets, either through bonds or a loan".

He noted that the Europeans have already demonstrated their willingness to transfer interest on reserves to Ukraine on a semi-annual basis. However, there are ways to "increase the value of these revenue streams over time".

"Instead of just transferring the annual profit from the reserves... conceptually, you can transfer the profit for 10 years or 30 years. The present value of those returns adds up to a very large number," Singh said.

The proposal is to be discussed by G7 finance ministers on the sidelines of the World Bank and IMF spring meeting in Washington next week.

Singh said the goal is to make a decision on the issue at the annual summit of G7 leaders in June.

Much of the frozen Russian money is in the EU, including an estimated €190 billion in assets held by Russian central banks at Euroclear, the central securities depository based in Brussels. Since the beginning of the war, they have generated a profit of €3.85 billion, and EU countries have discussed the possibility of using these proceeds to help Ukraine.

Author – Anastasiya Glotova, 12/04/2024