News and Politics • G7 agrees $50bn loan for Ukraine from Russian assets

The G7 has agreed to use frozen Russian assets to raise $50bn (£39bn) for Ukraine to help it fight invading Russian forces.

US President Joe Biden said it was another reminder to Russia "that we're not backing down", but Moscow has threatened "extremely painful" retaliatory measures.

The money is not expected to arrive until the end of the year but is seen as a longer-term solution to support Ukraine's war effort and economy.

Also at the G7 summit in Italy, Ukrainian President Volodymyr Zelensky and Mr Biden signed a 10-year bilateral security deal between Ukraine and the US, hailed by Kyiv as "historic".

The agreement envisages US military and training aid to Ukraine - but it does not commit Washington to send troops to fight for its ally.

Some $325bn worth of assets were frozen by the G7, alongside the EU, following Russia's full-scale invasion of Ukraine in 2022.

The pot of assets is generating about $3bn a year in interest.

Under the G7 plan, that $3bn will be used to pay off the annual interest on the $50bn loan for the Ukrainians, taken out on the international markets.

Speaking at a joint news conference at the summit's venue in Puglia, southern Italy, President Biden said the $50bn loan would "put that money to work for Ukraine and send another reminder to [Russian President Vladimir] Putin that we're not backing down".

The US leader stressed that Mr Putin "cannot wait us out, he cannot divide us, and we'll be with Ukraine until they prevail in this war".

President Zelensky thanked his American and other allies for their unwavering support.

And referring to 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 group of rich nations, Canada, France, Germany, Italy, Japan, the UK and US, have been important financial and military supporters of Ukraine as it battles to contain occupying Russian forces.

Other G7 leaders also hailed the $50bn loan deal, with UK Prime Minister Rishi Sunak describing it as "game changing".

The $50bn loan is a sizeable pot of money, when compared with the $61bn worth of US military aid that was finally agreed in May.

Some of those in Kyiv, who had been pushing for this cash, had wanted the G7 to release the whole frozen fund of $300bn, not merely the interest it is generating. The European Central Bank had ruled that out.

Unlike the US aid package, which directly translated into more missiles being sent to the front line, this money will likely not arrive until the end of the year, meaning it will have little impact on the current course of the war.

For now, Ukraine says it still urgently needs more weapons - primarily air defence systems to blunt Russia’s missile and drone attacks on its cities and power stations, as well as long awaited F-16 fighter jets, which it hopes will start arriving as early as this summer.

At the G7 summit, Mr Zelensky said the new security agreement included US shipments of those warplanes.

The loan deal is also hugely symbolic for Ukraine. Its aggressor is now being forced to pay, not only to repair the devastation it has wrought - but for Ukraine to defend itself.

One of Mr Zelensky's closest advisers has said that the West’s decision to punish Russia in this way, in one sense, marks a turning point in the war.

However, the loan is unlikely to force a Russian U-turn on its war in Ukraine.

Most of the frozen assets of the Central Bank of Russia are being held in Belgium.

Under international law, countries cannot confiscate those assets from Russia and give them to Ukraine.

Several hours before the G7 decision was announced, Russian Foreign Ministry spokeswoman Maria Zakharova warned that there would be "extremely painful" retaliatory measures.

Rishi Sunak has announced up to £242 million in bilateral assistance to Ukraine at the G7 summit in Italy.

The package is to be used for immediate humanitarian, energy and stabilisation needs in Ukraine and to lay the foundations for longer term economic and social recovery and reconstruction, the prime minister said.

The £242 million was allocated before Mr Sunak called a General Election for Thursday, July 4.

The UK and G7 leaders, who are currently meeting in Puglia, agree Moscow must pay for the damage it is causing Ukraine and will therefore explore how to use immobilised Russian assets - $285 billion (£222 billion) worth of which are held in G7 jurisdictions - to support Ukraine.

Mr Sunak said: "The UK will always stand shoulder to shoulder with Ukraine in its fight for freedom.

"Today we are once more ramping up economic pressure through sanctions to bear down on Russia's ability to fund its war machine.

"Putin must lose, and cutting off his ability to fund a prolonged conflict is absolutely vital."

Speaking to broadcasters after the announcement, Mr Sunak ducked suggestions that the current G7 summit might be his last as prime minister, if polling which widely suggests a Labour win at the General Election is to be believed.

Asked if he had done enough while in office to secure a legacy on the world stage, the prime minister said: "We've had a very productive set of meetings today, particularly on Ukraine, where I've been discussing with my colleagues a game changing package of support for Ukraine that would be funded by the profits on seized Russian assets.

"Now, this is something that I and the UK have personally championed and led on for a while now, so it's very positive to see it close to the finish line."

The UK, alongside G7 allies, has additionally announced 50 new sanctions designations and specifications against Russia - including ships in Russian President Vladimir Putin's shadow fleet.

Sanctions have also been imposed against Russian financial institutions and companies which help to supply Russia's military capabilities.

Foreign Secretary Lord Cameron said the penalties are "starving Putin of the revenue he desperately needs to fund his war chest".

He added: "We will continue to work alongside our partners to increase economic pressure and demonstrate that the UK and the G7 will stand by Ukraine in this fight."

The summit in Italy comes as the prime minister continues to face pressure at home over his decision to leave D-Day commemorations in France - with the backlash dominating his election campaign last week.

Foreign Secretary Lord David Cameron took Mr Sunak's place at a ceremony with leaders, including US President Joe Biden and French President Emmanuel Macron, who the prime minister is meeting with at the G7 summit.

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During the Puglia summit, Mr Sunak will attend sessions on the Middle East, economic security and China, as well as a credible G7 and UK offer to "the global majority".

The prime minister will also press other leaders to recognise migration challenges "across the route" and to take collective action.

He touted his flagship Rwanda scheme - which he says will go ahead with deportations starting in July if his party is re-elected - during a recent trip to Austria.

Fifteen EU countries, including Austria, signed a letter last month calling on the European Commission to tighten migration policy and to look at third country schemes.

Statistics: Posted by EnterpriseSovereign — 2024-06-13 09:29pm