Frozen Russian assets ‘will help fund Ukraine’ as G7 deal nears

The leaders of the G7 countries are close to agreeing a plan to use frozen Russian assets to fund Ukraine’s war effort, Lord Cameron has said.

The Foreign Secretary said an “emerging consensus” existed between Western countries on how to take advantage of more than £220 billion in Russian assets that have been frozen since Vladimir Putin ordered the invasion of Ukraine in 2022.

The United States has been pushing a plan to borrow billions to send to Ukraine in loans, secured against the future interest on the Russian money – most of which is in Brussels.

The idea is supported by the UK, but has encountered opposition from some European states including Germany, which has been cautious about the future of such a loan if it had a 10-year maturity date.

Such a deal would be likely to be agreed between members of the G7 and the EU, where some other countries, including Hungary and Slovakia, have expressed concerns about repurposing Russian money to fund the war.

Speaking in the House of Lords on Tuesday, Lord Cameron suggested that negotiators from the countries involved were close to an agreement.

“I think there is an emerging consensus that the interest on those assets can be used to support much larger financial support for Ukraine,” he said, adding that there was “an answer” around which G7 countries “can coalesce”.

He said: “If we can get that done, we really will be able to provide real financial firepower to Ukraine based on those assets rather than delivering the assets directly.”

The debate comes amid major concern in Western capitals about the sustainability of Ukraine’s war effort following months of funding holdup in Washington.

Mike Johnson, the Speaker of the House of Representatives, said on Monday night that he expected to bring Ukraine aid to a vote among US lawmakers, possibly ending the logjam.

His strategy would see financing for Ukraine, Israel and Taiwan separated into different votes, but he faces significant opposition to the vote from some Republican congressmen, and there is no guarantee that his plan would pass the Senate.

Jeremy Hunt, the Chancellor, said he would raise the issue with Janet Yellen, his US counterpart, on a visit this week.

“I think we should be thinking about anything we possibly can to come to the support of Ukraine,” he told Bloomberg, saying “everyone has to do their bit” and that he would have a “very open discussion” about the plans with EU countries.

Joe Biden and several of his intelligence and military officials have warned that Ukraine will lose significant territory this year without more US funding for the war.

Last week, the US military commander in Europe said Russia was outfiring Ukraine on the battlefield by five to one because of ammunition shortages, and warned that the figure would soon be 10 to one.

The plan to use Russian assets frozen in the West would be likely to involve interest payments being removed and sent directly to Kyiv, or the creation of a bond tied to the future revenue from Russian capital.

One version of the plan, supported by the European Commission, would see the interest payments used directly, with 90 per cent funding weapons purchases and 10 per cent put back into the EU budget.

However, Daleep Singh, the US deputy national security adviser for international economics, last week suggested a debt-based plan under which Ukraine would be sent the “present value of the future interest stream of the immobilised assets, either through a bond or a loan”.

He said: “Instead of just transferring the yearly profits from the reserves… it is conceptually possible to transfer the 10 years of profits or 30 years of profits. The present value of those profits adds up to a very large number.”

As it faces another summer of war with Russia, Ukraine is also struggling to refinance its public spending, with talks between Kyiv and private creditors expected to conclude later this year.

The IMF is running a four-year loan programme for Ukraine, which has so far released $5.4 billion (£4.3 billion) of a total $15.6 billion. Its third loan payment, of $880 million, was approved at the end of last month.