The G7 has decided to utilize frozen Russian assets to generate a $50 billion (£39bn) loan for Ukraine, aimed at supporting its efforts against the Russian invasion.
President Joe Biden emphasized that this move serves as a clear signal to Russia “that we’re not backing down,” while Moscow has warned of “extremely painful” countermeasures.
Although the funds are not expected to be available until the year’s end, they are intended to provide long-term support for Ukraine’s military and economic stability.
During the G7 summit in Italy, Ukrainian President Volodymyr Zelensky and President Biden signed a 10-year bilateral security agreement, described by Kyiv as “historic.”
This pact includes U.S. military and training assistance to Ukraine but does not obligate Washington to deploy troops.
The G7 and the EU froze approximately $325 billion worth of Russian assets following Russia’s large-scale invasion of Ukraine in 2022.
These assets generate around $3 billion annually in interest.
The G7 plan involves using this interest to cover the annual payments on the $50 billion loan taken out on international markets for Ukraine.
At a joint press conference in Puglia, southern Italy, President Biden stated that the $50 billion loan would “put that money to work for Ukraine and send another reminder to [Russian President Vladimir] Putin that we’re not backing down.”
He underscored that Putin “cannot wait us out, he cannot divide us, and we’ll be with Ukraine until they prevail in this war.”
President Zelensky expressed gratitude to his American and other allies for their steadfast support.
Reflecting on the new security deal, he said, “It’s a truly historic day and we have signed the strongest agreement within Ukraine and the US since our independence [in 1991].”
The G7, comprising Canada, France, Germany, Italy, Japan, the UK, and the US, has been a crucial source of financial and military aid for Ukraine in its struggle against Russian forces.
UK Prime Minister Rishi Sunak described the $50 billion loan deal as “game changing.”
While the $50 billion loan is substantial compared to the $61 billion in US military aid finalized in May, some in Kyiv had hoped the G7 would release the entire $300 billion frozen fund rather than just the interest it generates.
The European Central Bank, however, ruled against this.
Unlike the immediate impact of the US aid package, this new funding will likely not arrive until the end of the year, meaning it won’t significantly influence the current phase of the war.
Meanwhile, Ukraine continues to call for more immediate military support, including air defense systems and F-16 fighter jets, which are anticipated to begin arriving as early as this summer.
The new security agreement with the US includes provisions for these aircraft.
Symbolically, the loan deal is significant for Ukraine, as it compels its aggressor to finance not only the rebuilding efforts but also Ukraine’s defense.
One of President Zelensky’s top advisers noted that the West’s decision to penalize Russia in this manner represents a pivotal moment in the conflict.
However, the loan is unlikely to prompt Russia to reverse its stance on the war.
Most of the Central Bank of Russia’s frozen assets are held in Belgium, and international law prevents these assets from being confiscated and transferred directly to Ukraine.
Ahead of the G7’s announcement, Russian Foreign Ministry spokeswoman Maria Zakharova warned of “extremely painful” retaliatory actions.
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