G7 allies are moving ahead with a US$50B loan for Ukraine backed by frozen Russian funds

Secretary of the Treasury Janet Yellen attends a news conference at the Treasury Department in Washington on Oct. 22, 2024. (J. Scott Applewhite / AP Photo)

WASHINGTON -

Ukraine will receive US$50 billion in loans, backed by frozen Russian assets, from Group of Seven allies, the White House said Wednesday. Distribution of the money will begin by year's end, according to American officials who said the United States is providing US$20 billion of the total.

Leaders of the wealthy democracies agreed earlier this year to engineer the mammoth loan to help Ukraine in its fight for survival after Russia's invasion. Interest earned on profits from Russia's frozen central bank assets would be used as collateral.

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"To be clear, nothing like this has ever been done before," said Daleep Singh, the deputy national security adviser on international economics. "Never before has a multilateral coalition frozen the assets of an aggressor country and then harnessed the value of those assets to fund the defence of the aggrieved party all while respecting the rule of law and maintaining solidarity."

At a ceremony Wednesday in Washington, U.S. Treasury Secretary Janet Yellen and Ukraine's finance minister, Sergii Marchenko, planned to put in writing assurances that the U.S. loan will be paid for by the windfall proceeds of the immobilized Russian sovereign assets, not by American taxpayer dollars.

"Russia is paying for this support," Yellen said at a news conference Monday where she said the loan package was close to being finalized.

Singh said the Biden administration intends to divide the U.S. share of US$20 billion between aiding Ukraine's economy and military. It will require congressional action to send military aid, and Defence Secretary Lloyd Austin said that weapons and equipment being promised now can take weeks or months to get to Ukraine.

The additional US$30 billion will come from the European Union, the United Kingdom, Canada and Japan, among others.

The idea of using Russia's frozen assets to help Ukraine faced resistance at first from European officials who cited legal and financial stability concerns. The move gained momentum after more than a year of negotiations between finance officials and after U.S. President Joe Biden in April signed legislation that let the government seize the roughly US$5 billion in Russian state assets in the U.S.

The G7 announced in June that most of the loan would be backed by profits being earned on roughly US$260 billion in immobilized Russian assets. The vast majority of that money is held in EU nations.

The U.S. and its allies immediately froze whatever Russian central bank assets they had access to when Moscow invaded Ukraine in 2022.

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The timing of the loan's disbursement has been called into question, coming about two weeks before the presidential election between Republican Donald Trump and Democrat Kamala Harris. The candidates have taken opposing views on the threat from Russia.

Defence Secretary Lloyd Austin dismissed suggestions that military aid to Ukraine approved by the Biden administration now could be negated by any new team in power.

"I think we're pretty sure that these materials will continue to flow," Austin said, adding that he is confident it all will be delivered "on the timeline that we've outlined."

The World Bank's latest damage assessment of Ukraine, released in February, estimates that costs for reconstruction and recovery of the nation stand at US$486 billion over the next 10 years.

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Associated Press writer Lolita C. Baldor contributed to this report.