G7 Nears Framework Deal for $50 Billion Loan to Ukraine

The Group of Seven (G7) nations are on track to finalize a framework deal for a $50 billion loan to Ukraine, backed by frozen Russian assets, by October. European Economic Commissioner Paolo Gentiloni announced this progress during a G20 meeting in Rio de Janeiro, highlighting advancements in both technical and political discussions surrounding the loan, which was initially agreed upon in principle in June. Gentiloni expressed optimism that the framework would be established in time for Ukraine to access markets by the end of the year. The proposed loan would be serviced through proceeds from approximately $300 billion in Russian central bank assets that have been frozen in Western countries since Russia's invasion of Ukraine in early 2022. The majority of these assets, around €210 billion ($228 billion), are held in Europe, with additional amounts in the United States, Britain, and Japan. This arrangement underscores the reliance on European assets to support the financial aid to Ukraine. In response to U.S. concerns, the European Union (EU) is exploring ways to enhance the legal certainty of the asset freeze, which is crucial for bond buyers involved in financing the loan. Options under consideration include establishing an open-ended agreement for the asset freeze, subject to annual reviews contingent on the cessation of Russian aggression and potential compensation. However, any modifications to the asset freeze would require unanimous approval from all 27 EU member states, posing a challenge given Hungary's close ties with Russia, which may lead to objections.