The G7 has reached an agreement to utilize frozen Russian assets, aiming to generate $50 billion (£39 billion) for Ukraine to aid its resistance against invading Russian forces.
US President Joe Biden framed this decision as a reaffirmation of the group’s resolve, signaling to Russia that they remain steadfast in their stance. However, Moscow has issued warnings of potential “extremely painful” retaliatory actions.
During the G7 summit in Italy, Ukrainian President Volodymyr Zelensky and President Biden signed a significant 10-year bilateral security pact between Ukraine and the US, hailed by Kyiv as a “historic” milestone.
The pact outlines provisions for US military assistance and training for Ukraine. Notably, it does not entail a commitment from Washington to deploy troops to engage in combat on behalf of Ukraine.
As per the White House, the security agreement entails collaborative efforts between Washington and Kyiv to bolster Ukraine’s defense capabilities, enhance its deterrence measures, strengthen its defense industry, and provide support for economic recovery and energy security.
The security deal also means that in the event of a future Russian armed attack against Ukraine, there will be consultation “at the highest levels to determine appropriate and necessary measures to support Ukraine and impose costs on Russia”, the statement added.
Individually, the G7, along with the EU, collectively froze assets worth $325 billion following Russia’s full-scale invasion of Ukraine in 2022. This pool of assets generates approximately $3 billion annually in interest.
As per the G7’s strategy, this $3 billion interest will be allocated to cover the yearly interest on the $50 billion loan secured by Ukraine from international markets. However, the actual disbursement of funds is not anticipated until the year’s end, serving as a more protracted solution to bolster Ukraine’s war efforts and economic stability.
During a joint press briefing at the summit venue in Puglia, southern Italy, President Biden emphasized that the $50 billion loan would empower Ukraine and convey a resolute message to Russian President Vladimir Putin about the G7’s unwavering stance.
President Zelensky expressed gratitude to his American and other allies for their steadfast support. Regarding the new security agreement, he hailed it as a historic milestone, marking the most robust pact between Ukraine and the US since its independence in 1991.
The G7, comprising Canada, France, Germany, Italy, Japan, the UK, and the US, has played a crucial role in providing financial and military assistance to Ukraine as it combats Russian occupation.
Other G7 leaders echoed appreciation for the $50 billion loan agreement, with UK Prime Minister Rishi Sunak labeling it as “game-changing.”
Compared to the $61 billion worth of US military aid finalized in May, the $50 billion loan constitutes a substantial financial resource.
A senior White House official highlighted the multifaceted utility of the G7-endorsed fund, including potential applications such as military assistance, budgetary support, humanitarian aid, and reconstruction endeavors.
The official underscored the adaptable nature of the fund, catering to various preferences among contributing nations, some directing funds toward budgetary and reconstruction support, while others earmark resources for military assistance.
Some in Kyiv, advocating for immediate financial assistance, had lobbied for the release of the entire $300 billion frozen fund by the G7, rather than just its interest. However, the European Central Bank dismissed this proposal.
Christine Lagarde, the bank’s president, had cautioned against such a move, warning of potential disruption to the established international order and the need for Russia’s adherence to it.
Unlike the direct impact of the US aid package, which translated into increased missile deployment on the front line, the released funds are not expected to arrive until year-end, likely exerting minimal influence on the ongoing trajectory of the conflict.
Ukraine continues to press for urgent military support, primarily air defense systems to counter Russian missile and drone assaults on its urban areas and critical infrastructure. Additionally, the awaited arrival of F-16 fighter jets, anticipated as early as this summer, is critical.
During the G7 summit, President Zelensky announced that the new security agreement includes the provision of these warplanes by the US.
The loan agreement holds significant symbolic value for Ukraine, as it signifies the aggressor’s obligation to contribute not only to the repair of the damage it caused but also to Ukraine’s defense efforts.
A close advisor to President Zelensky views the West’s punitive measures against Russia as a potential turning point in the conflict.
However, the loan is unlikely to prompt a reversal in Russia’s stance on the war in Ukraine.
The majority of the Central Bank of Russia’s frozen assets are held in Belgium, and under international law, countries are barred from confiscating these assets from Russia and transferring them to Ukraine.
Hours before the G7’s decision, Russian Foreign Ministry spokeswoman Maria Zakharova cautioned against the use of funds generated from frozen Russian assets, warning of “extremely painful” retaliatory actions.
In February, Russia’s Finance Minister hinted at potential retaliatory measures if Western nations moved to seize Moscow’s funds.
European officials have estimated that European investors hold approximately €33 billion worth of funds trapped in Russia.
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