The United States Demands EU Guarantees for $50 Billion Loan to Ukraine

by Roman Cheplyk
Wednesday, June 5, 2024
The United States Demands EU Guarantees for $50 Billion Loan to Ukraine

The United States is urging the European Union to provide guarantees for the continuation of sanctions against Russia to facilitate a $50 billion loan to Ukraine

This loan would be serviced using revenues from frozen Russian assets.

Key Points:

  • Loan Proposal: The US is willing to offer a $50 billion loan to Ukraine, contingent on the EU's agreement to indefinitely extend sanctions against Russia. The repayment would be sourced from profits generated by frozen Russian assets.

  • Sanctions Extension: The EU currently renews sanctions every six months, requiring unanimous consent from all member states. The US insists these sanctions remain in place until the war in Ukraine concludes to ensure the loan is not solely their burden.

  • Meeting Agenda: EU finance ministers will discuss this proposal during their meeting on Wednesday. Washington hopes to finalize the agreement before the G7 summit in Italy next week, where the financing mechanism will be a central topic.

  • Details and Challenges: The specifics of the loan, including its maturity, interest rate, and whether it will be provided directly or via an intermediary like the World Bank, are still under discussion. The US emphasizes the need for the EU to guarantee that the assets remain frozen until Russia compensates Ukraine for war damages.

  • Russian Assets: The primary assets in question are held in the Belgian central securities depository Euroclear, generating about €3 billion annually. Should these profits fall short or if sanctions are not extended, the US might have to cover the loan.

  • EU Concerns: Some EU governments are wary of the financial implications. Hungarian leader Viktor Orban has previously blocked sanctions extensions, posing a potential obstacle to unanimous consent.

  • Alternative Options: Another proposal is for the EU and other G7 countries to provide bilateral loans to Ukraine, secured by profits from Russian assets in their jurisdictions. This would likely require EU funds from the common budget, necessitating unanimous agreement from all member states.

  • Operational Constraints: Implementing these guarantees quickly is challenging due to legal and operational constraints. The EU ministers are expected to decide on their readiness to proceed with this proposal during the meeting.

The negotiations are complex, involving significant financial and political considerations, with the goal of ensuring sustained support for Ukraine amidst the ongoing conflict.

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