Frozen Russian assets are beginning to flow into Ukraine this year, with two parallel initiatives that are gaining widespread support in Europe and the U.S. amid the ongoing war in Eastern Europe.
Since the start of the Russian invasion, approximately $300 billion in Russian assets were frozen by G7 countries, two thirds of which are held in countries of the European Union.
On Tuesday, EU member states approved a plan to divert earnings from those assets, which have amassed about €3.9 billion ($4.23 billion) in the past year, to Ukraine‘s war effort against Moscow's invasion.
The funds are being managed by a Belgium-based financial service and clearing company, Euroclear, Bloomberg reports. Under the EU plan, $3.3 billion would reach Ukraine this year.
Yellen’s $50 Billion Plan: A separate plan is being pushed by the U.S. to use future proceeds from frozen Russian assets to finance a $50 billion loan to Ukraine between countries of the G7 group. The U.S. initiative will be discussed in an upcoming G7 meeting that will be held in Italy in June. If approved, it would replace the EU's plan.
G7 nations include the United States, Japan, Germany, France, the U.K., Italy and Canada.
During a Tuesday visit to Frankfurt, Germany, U.S. Treasury Secretary Janet Yellen stated that the plan should be ready for approval by the G7 meeting.
Finance ministers from the G7 group are gathering in Italy this week to discuss this plan, Reuters reports.
Both the approved EU plan as well as Yellen's plan aim to draw on funds generated from the frozen assets without diving into the assets themselves. Yet the U.S.-led plan would unlock $50 billion for Ukraine, instead of the $3.5 billion a year that would come from interest earnings.
In Yellen's plan, a bond or a loan to Ukraine would be backed by the seized assets. European countries have been hesitant to approve such a proposal because it would require them to commit to holding on to the assets for at least 20 years.
EU members are walking the thin line between providing much needed support for Ukraine, and exposing themselves to retaliation by Russia if their actions are considered too overreaching.
France and Germany have voiced concerns over the legality of the plan.
The U.S. is hoping that G7 countries would be able to pay for the $50 billion upfront, and U.S. officials have said that the country could handle the entire loan on its own if needed, though that would entail a confirmation by European countries that the funds would remain frozen until the debt has been repaid.
In late April, Biden signed the REPO (Rebuilding Economic Prosperity and Opportunity for Ukrainians) Act, which gives the administration permission to seize Russian assets held in the U.S. in favor of Ukraine. About $5 billion of the total frozen assets are held in the U.S., according to AP News.
China will also be on the table in upcoming G7 talks, as the group fears the consequences of possible market floodings of cheaper Chinese products in specific industries like EVs and renewable energy.
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