(Bloomberg) -- The UK will loan Ukraine £2.3 billion ($3 billion) to purchase military equipment, paid for by profits generated by frozen Russian assets.
The funding comes as part of a wider $50 billion package this year from the Group of Seven nations and the European Union that was announced in June. It’s the first time Britain has detailed its contribution. The plan was for the EU and the US to provide about $20 billion each, with Canada, Japan and the UK contributing the remainder.
“It’s turning the proceeds of Putin’s own corrupt regime against him by putting it into the hands as loans for the Ukrainians,” Defence Secretary John Healey told reporters at a briefing in London. “The Ukrainians will make the call about the systems, the weapons, the ammunition that they most need.”
The funding comes at a time when Ukraine desperately needs extra cash, with Russia making advances on the battleground and another winter approaching. Speaking alongside Healey, UK Chancellor of the Exchequer Rachel Reeves said Britain wanted to get its portion of the package to Ukraine as quickly as possible.
Other G-7 partners are expected to confirm their pledges at a meeting of ministers in Washington on Friday.
The G-7 have collectively frozen about $280 billion of Russian central bank assets, with the vast majority of the funds in Europe, where they are expected to generate about $3 billion to $5 billion in profits a year. But one snag with the $50 billion loan plan has been Hungarian opposition to changes to the EU’s sanctions regime, a step that is needed to unlock significant US funding.
The US is expected to contribute to the loan despite Budapest’s continued opposition, according to people familiar with the matter.
Reeves said the UK’s contribution to the plan and the release of funds to Ukraine was not contingent on funding being agreed by other allies. Healey also said that the UK would discuss with Ukraine how it intends to use the funds, and wouldn’t comment on whether Ukraine would be allowed to purchase Storm Shadow missiles to hit targets in Russia.
“This is about reinforcing their ability to defend against this brutal, illegal invasion,” Healey said. “And to ensure that we play our fullest part as the UK in making sure Ukraine prevails.”
Separately, on the question of when Britain’s new government will meet its target of spending 2.5% of gross domestic product on defense, Reeves said details would be set out “as soon as we can.”
“We made that commitment, we stand by that commitment,” she said. “When we set that out, that will be within our fiscal rules and it will be fully funded.”
The UK loan is on top of the £12.8 billion already committed in military, economic and humanitarian support to Ukraine, Britain’s Treasury said in a statement.
--With assistance from Jorge Valero and Alberto Nardelli.
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