(Bloomberg) -- Group of Seven nations finalized a $50 billion loan to Ukraine backed by the profits generated by immobilized Russian central bank assets, clearing the way for much-needed aid to soon flow to Kyiv and largely shielding critical financing from the outcome of the US presidential election.
“Today, we, the leaders of the Group of Seven have reached a consensus on how to deliver approximately $50 billion in Extraordinary Revenue Acceleration (ERA) loans to Ukraine,” the G-7 leaders said in a joint-statement. “The loan proceeds will be disbursed through multiple channels to support Ukraine’s budgetary, military and reconstruction assistance.”
The deal came after the US and its allies overcame issues on how to structure such a loan and, more importantly, how to ensure its repayment is assured so that their taxpayers won’t be on the hook.
The US said it will provide $20 billion, while Europe is expected to contribute roughly the same amount and the UK said it would put in around $3 billion. Canada and Japan are also expected to contribute.
Under the agreed mechanism, the US, EU and other G-7 nations will each provide a loan to Ukraine that will be repaid using the profits generated by the roughly $280 billion of blocked funds, most of which lie immobilized in Europe.
The loan will offer financial support for Ukraine as it seeks to rebuild and defend itself, and will help cover its financing needs through 2025 and beyond.
The US and its allies are aiming to use the loan as a signal of their unrelenting support to Kyiv and send a message to Russian President Vladimir Putin that he can’t out-wait them in the conflict.
“We will not tire in our resolve to give Ukraine the support it needs to prevail,” the G-7 leaders said in the statement.
The US expects to disburse at least half of its $20 billion share to a World Bank vehicle — which will manage the US loans — this December, and possibly even the entire amount. Such a timeline would mean the US might have disbursed it’s full share before the next administration takes office in 2025.
Agreement on the loan caps a year of intense diplomatic efforts by the US to convince allied counterparts, especially in Europe, to tap the economic value of these assets.
While an initial US-led push for an outright seizure of the frozen funds was met with major resistance, talks on utilizing the assets to yield value for Ukraine picked up steam, especially as the political environment on both sides of the Atlantic threw further taxpayer-funded aid into question.
--With assistance from Manuela Tobias.
©2024 Bloomberg L.P.