G7 Officials Report Growing Support for US Plan to Utilize Frozen Russian Asset Revenues

The G7 nations are considering a new proposal to use future interest on frozen Russian assets to aid Ukraine, rather than seizing them outright. This proposal, which could generate around $5 billion a year, is gaining momentum among G7 officials as they prepare for a summit in Italy in June.

However, there are still disagreements among G7 members about certain “holdbacks” that could reduce the expected windfall profits to $2.5-$3.0 billion. These holdbacks include Belgium’s tax rate, a fee from depository Euroclear, and a proposed litigation reserve.

Despite these challenges, G7 finance ministers will revisit the issue in late May with the goal of reaching a consensus proposal to present to leaders at the June summit. The urgency to build international consensus is clear, as there is a recognition that more needs to be done to support Ukraine.

The proposal to collateralize the interest earned on the frozen Russian assets is seen as a practical approach that could provide a longer-term stream of funding for Ukraine. This idea has the potential to bridge the gap in financing that Ukraine is expected to face in 2025 and 2026.

While Washington maintains that all options, including seizing Russian assets, are justified under international law, the focus is on building consensus around a plan that can provide immediate assistance to Ukraine. The shift towards focusing on interest from the assets comes after facing resistance from some European countries concerned about the impact on the euro.

Overall, the proposal to use future interest on frozen Russian assets to aid Ukraine is seen as a reasonable approach that could lead to a positive agreement in June. The G7 countries are committed to keeping the Russian assets frozen until certain conditions are met, ensuring a long-term income stream for Ukraine.