Two weeks ago, President Biden changed his mind and approved the launch of American weapons on Russian territory. Now, he and his closest allies are preparing for another attack, using proceeds from Russia’s own financial assets to help rebuild Ukraine.
For two years, the world’s largest Western economies have been arguing over what to do with $300 billion in frozen Russian assets that the Kremlin left in Western financial institutions after the outbreak of war in Ukraine in 2022.
Now, after a lengthy debate over whether the West can legally hand over those assets to the government of Ukrainian President Volodymyr Zelenskiy, the allies appear to be on the verge of a compromise that will be announced at a Group of Seven summit in Italy.
Western officials say the Group of Seven, a group of the world’s wealthiest large democracies, is close to agreeing to lend Ukraine about $50 billion to rebuild its shattered infrastructure, with the loan repaid with interest from frozen Russian assets. But experts say even that amount would only be a preliminary step toward building a new Ukraine.
The funding announcement is part of a summit this week to discuss how to reverse Russia’s new momentum and achieve a ceasefire between Israel and Hamas. Biden and Zelensky will meet on Thursday to sign the security agreement, said Jake Sullivan, Biden’s national security adviser.
“We want to make clear that the United States supports the Ukrainian people, that we stand with them and will continue to help address their security needs, not just tomorrow but well into the future,” Sullivan told reporters aboard Air Force One en route to Italy.
“By signing this agreement, we will also be sending a signal to Russia of our resolve,” he added. “If Vladimir Putin thinks he can outlast the coalition that supports Ukraine, he is wrong.”
During the summit, which will include a meeting with Pope Francis to focus on how to harness the power of artificial intelligence, leaders will try to look beyond the current crisis.
Loan Agreement, plus A raft of new sanctions The effort to reshape Russia’s defense industrial base, aimed at countering China, is part of Russia’s latest effort to support Ukraine and hinder Russia at a critical moment in the 27-month conflict.
Still, Europe is preparing for the possibility that former President Donald J. Trump, who openly vowed to withdraw from NATO, could return to power when the alliance next meets in 2025. Several of the leaders attending — including British Prime Minister Rishi Sunak and French President Emmanuel Macron — are facing elections that could redefine Europe.
The hurdle Biden faces is convincing his allies, starting with Zelensky, that the United States plans to continue fighting Ukraine no matter what happens in November. Biden aides acknowledge that repeated delays in congressional approval of $61 billion in new munitions and air defenses this spring have cost Ukraine lives, territory and tactical military advantages.
Biden told Zelenskiy in France last week that “I’m sorry for not knowing what was going to happen over the last few weeks,” and placed the blame on Republicans in Congress. “We had some very conservative members of Congress who stood in the way of this,” he said.
But the strength of congressional opposition also raises the question of whether this last major military injection will be the last, and threatens Mr. Biden’s position as a Western leader to rally other allies against further attacks from President Vladimir V. Putin.
Now, as the war enters a critical juncture, G7 leaders appear ready to end months of discussions over how to use $300 billion in frozen Russian central bank assets, much of it held in European financial institutions, to inject economic aid into Ukraine.
During a visit to Normandy last week, Biden appeared to have convinced France, one of the last remaining opponents, to support the deal. At the end of the visit, French President Emmanuel Macron He told reporters that he hoped “All G7 countries will agree to provide a $50 billion solidarity fund to Ukraine.”
After much internal debate, the Biden administration has been pushing to seize the assets outright. But the idea has not been pursued in Europe, where most of the money is held, because of concerns that it would violate international law.
The EU did agree to provide Ukraine with about €3 billion a year from the interest earned on the central bank’s assets, most of which are held at the Belgian central securities depository Euroclear.
But the Biden administration, hoping to provide Ukraine with more money up front, has devised a plan to use that interest to back loans that the U.S. and other G7 nations could extend immediately.
The loan could be as much as $50 billion and would be repaid in installments using the so-called windfall profits generated by Russian funds.
Finance ministers from the Group of Seven have been working in recent weeks to hash out the complex details of how such a loan would be implemented, but several unanswered questions remain. Officials have been trying to determine how the money would actually get to Ukraine and have discussed administering it through an institution such as the World Bank as an intermediary.
It is unclear how the loans would be repaid if the war ended before the bonds matured or if interest rates fell so that the returns on the assets were insufficient to repay the loans.
John E. Herbst, Unlocking those assets is critical for the G7, especially after congressional deadlock and U.S. delays in delivering certain weapons to Ukraine, said Nikita Lopez, senior director of the Atlantic Council’s Eurasia Center and a former U.S. ambassador to Ukraine.
“The administration deserves credit for moving quickly to assist Ukraine after Congress acted,” he said. “But we remain slow to provide Ukraine with the appropriate weapons systems it needs, especially now. This is not just a failure for the United States; it is a failure for the entire alliance.”
Evelyn Farkas, executive director of the McCain Institute at Arizona State University and former deputy assistant secretary of defense for Russia, Ukraine and Eurasia under President Barack Obama, said unfreezing the frozen assets would be a “game changer.”
Ms. Farkas said the U.S. delays were likely “focusing the Europeans’ attention” and making European countries think: “Well, we have to come up with alternatives because the U.S. is unreliable.”
“Hopefully they can stay focused,” she said.
Ellen Rappeport Contributed reporting.
