Explained: The Strategy of G7 and EU to Utilize Frozen Russian Assets to Benefit Ukraine

**G7 and EU Mull Innovative Financing for Ukraine Using Frozen Russian Assets**

In a groundbreaking move, the Group of Seven (G7) nations, alongside the European Union, are deliberating on a novel financial strategy to support Ukraine amidst its ongoing crisis. The plan involves leveraging profits from frozen Russian assets in the West to secure a substantial loan for Kyiv, ensuring its financial stability into 2025.

With around 260 billion euros of Russian central bank funds currently immobilized globally—most of which is held within the EU—these assets generate an annual profit of between 2.5 billion and 3.5 billion euros. The EU posits that these profits, not contractually bound to Russia, could serve as a significant windfall. The United States has proposed utilizing this unexpected revenue to back a $50 billion loan on the market, a suggestion that has sparked controversy, with Russia deeming any redirection of these profits as outright theft.

This financial maneuver is set to be a key topic at the upcoming G7 summit, scheduled for June 13-15, involving the world’s major economies: the U.S., Canada, Japan, Britain, France, Germany, and Italy. A consensus on this strategy would not only underscore a unified stance in support of Ukraine but also guarantee Kyiv’s financial security through 2025, irrespective of the outcome of the next U.S. presidential election.

The discussions have narrowed down to two primary options, hinging on who would undertake the borrowing on Ukraine’s behalf. One scenario sees the United States raising the funds, with the European Union ensuring that the windfall profits would cover the borrowing costs. This approach is favored for its speed and because it sidesteps the creation of new financial obligations for EU members—a critical consideration for countries like Germany.

However, this option raises questions about the extent and nature of the assurances required by Washington, particularly concerning who would guarantee the loan’s repayment, especially in the event of Ukrainian debt restructuring or fluctuating interest rates.

An alternative proposition involves the EU directly borrowing the funds, with repayment guaranteed by the EU budget. This method keeps the entire process within the EU framework, eliminating the need to modify existing sanctions regimes—a significant advantage given Hungary’s close ties to the Kremlin and potential veto power.

Despite its merits, this second option faces hurdles, including the need for European Parliament approval—a process that could extend over several months, especially with the upcoming parliamentary elections and summer recess.

As the G7 summit approaches, the international community watches closely, anticipating a decision that could redefine financial support mechanisms for nations in crisis, while also navigating the complex geopolitical implications of utilizing frozen assets as a tool for economic aid.