Two weeks after President Biden changed his position and approved the firing of American weapons into Russian territory, he and his closest allies are preparing a different kind of attack, using the proceeds from the Russian financial assets to support Ukraine’s reconstruction.
For two years, the world’s largest Western economies have debated how to deal with the $300 billion in frozen Russian assets the Kremlin left with Western financial institutions after the collapse. Invasion of Ukraine begins in 2022.
Now, after lengthy debates over whether the West can legally transfer those assets to the government of President Volodymyr Zelensky of Ukraine, the allies appear close to reaching a compromise, which will announced at the Group of 7 Summit in Italy.
The Group of 7, which includes the world’s wealthiest major democracies, is set to agree to loan Ukraine about $50 billion to rebuild the country’s devastated infrastructure, with the understanding that the money will be repaid with interest earned on frozen Russian assets. , Western officials said. But experts say even that amount of money is only beginning to have an impact on building a new Ukraine.
The financial announcement will be just one part of this week’s summit, which ranges from how to reverse Russia’s new momentum to how to bring about a ceasefire between Israel and Hamas. Mr. Biden and Mr. Zelensky will meet on Thursday and sign a security agreement, said Jake Sullivan, Mr. Biden’s national security adviser.
“We want to demonstrate that the United States supports the people of Ukraine, that we stand with them, and that will continue to help address their security needs,” Sullivan told reporters aboard the Air Force ship. , not just tomorrow but also in the future.” One is on its way to Italy.
“By signing this, we will also send Russia a signal of our determination,” he added. “If Vladimir Putin thinks he can outlast the coalition supporting Ukraine, he is wrong.”
There will be moments during the summit where leaders will try to overcome current crises, including a meeting between leaders and Pope Francis, focused on harnessing power of artificial intelligence.
Loan agreement, combined with new series of sanctions to counter China’s efforts to rebuild Russia’s defense industrial base, as part of the latest efforts to strengthen Ukraine and embarrass Russia at a dangerous moment in the long-running conflict. 27 months long.
However, Europe is preparing for the possibility that former President Donald J. Trump, who publicly announced his withdrawal from NATO, may return to power by the time of the next meeting in 2025. And some experts leaders present – including Prime Minister Rishi Sunak of Britain and President Emmanuel Macron of France – are facing elections that could reshape Europe.
Mr. Biden faces obstacles in convincing his allies, starting with Mr. Zelensky, that the United States plans to continue the war with Ukraine, no matter what happens in November. Aides Mr. Biden admitted that significant delays in Congress passing a new $61 billion ammunition and air defense system package this spring cost Ukraine lives, territory and advantages. tactical military.
Mr. Biden told Mr. Zelensky last week in France that “I am sorry for weeks of not knowing what was going to happen” and placed the responsibility on the shoulders of Republicans in Congress. “Some of our very conservative members supported it,” he said.
But the scope of the opposition in Congress also raises questions about whether that last major military injection will be the last, and threatens Mr. Biden’s claim as leader West, who rallied remaining allies to counter further attacks by the opposition. President Vladimir V. Putin.
Now, with the war at a critical juncture, G7 leaders appear ready to end months of deliberation over how to use $300 billion in frozen assets of Russia’s central bank, part of are largely held in European financial institutions. The idea is to provide economic aid to Ukraine.
During a trip to Normandy last week, Mr. Biden seemed to persuade France, one of the last remaining countries, to support the agreement. At the end of the trip, President Emmanuel Macron of France told reporters he was hopeful “All G7 members will agree to a $50 billion solidarity fund for Ukraine.”
The Biden administration, after considerable internal wrangling, has pushed for outright asset forfeiture. But that idea failed in Europe, where most of the money is held, over concerns that it would violate international law.
The European Union has agreed to use the interest that central bank assets earn where most of them are stored – at Belgium’s central securities depository, Euroclear – to provide Ukraine with approximately 3 billion euros per year.
But the Biden administration wants to give Ukraine more money up front, so it has devised a plan to use those profits to back a loan that the United States and other Group of 7 countries can make immediately.
The loan could be up to $50 billion and would be repaid over time with so-called windfall profits generated from Russian money.
In recent weeks, Group of 7 finance ministers have tried to iron out the intricate details of how such a loan would work, with several outstanding questions still to be answered. Officials are trying to determine how the money will actually get to Ukraine and have discussed running it through an organization like the World Bank as an intermediary.
It is unclear how the loan would be repaid if the war ended before the bonds matured or if interest rates fell, leaving the proceeds from the assets insufficient to repay the loan.
John E. Herbst, The senior director of the Eurasian Center at the Atlantic Council, and former US ambassador to Ukraine, said that unlocking assets is of prime importance to the Group of 7, especially after Deadlock in Congress and U.S. delays in supplies to Ukraine. certain weapons.
“The administration was quick to get aid to Ukraine after Congress acted, and that’s to their credit,” he said. “However, we are still slow in providing Ukraine with what it needs in terms of appropriate weapons systems, especially now. This is not just an American failure; It is the failure of the entire coalition.”
Evelyn Farkas, executive director of the McCain Institute at Arizona State University, who previously served as deputy assistant secretary of defense for Russia, Ukraine and Eurasia under President Barack Obama, said the opening locking up frozen assets would be a “game changer.”
Ms. Farkas said that the US delay has the potential to “focus European minds” on making European countries think: “Okay, we have to come up with alternative solutions because the US is not trustworthy.” ”.
“Hopefully,” she said, “they stay focused.”
Alan Rappeport Report contributions.
