The US has proposed raising tens of billions of euros in debt for Ukraine, secured against the future profits generated by Russian assets that have been frozen by Western countries, according to the Financial Times.
The issue of using frozen funds to help Kyiv in its struggle against Russian invaders has become more urgent in recent months, with the US Congress halting assistance for Ukraine.
Meanwhile, the G7 countries have been split on what to do with €260bn in Russian assets frozen by the West since February 2022.
Washington supports the idea of confiscating the funds and transferring them to Kyiv, while some European officials fear that the move can destabilize financial markets.
As per FT, the EU countries would instead give Kyiv the profits generated by the underlying assets.
“We’re at a point in which we should explore every possible avenue to maximize the value of the immobilized reserves for Ukraine,” said Daleep Singh, a US deputy national security adviser for international economics, on 10 April in Kyiv.
Singh said the US proposal aims to expedite the present value of the future interest stream of the immobilized assets through a bond or a loan.”
He highlighted that European counterparts had previously shown a readiness to transfer interest from the reserves to Ukraine on a biannual basis. Nonetheless, there are strategies available to amplify the value of those income streams over the long term.
“Instead of just transferring the yearly profits from the reserves . . . it’s conceptually possible to transfer the ten years of profits or 30 years of profits.
The present value of those profits adds up to a very large number,” he said.
The G7 minister will most likely be discussed on the sidelines of the World Bank and IMF spring meetings in Washington next week and approved at an annual summit in June.
Currently, most of the frozen Russian assets are now in the EU, with €190 bn in Russian central bank assets held at Euroclear, a central securities depository in Brussels. The funds have generated €3.85 bn in profits since 2022, and the EU countries have been discussing deploying the money to help Ukraine.
Under a new EU plan, which is planned to be adopted by all the bloc’s members, future profits will be used to buy weapons for Ukraine and fund reconstruction efforts.
With the US proposal added to the mix, a possible compromise would be achieved by using part of the profits for military equipment purchase and reconstruction and part of it to back debt. It will also generate more funds for Ukraine.
According to a European official, a bond could deliver between €30 bn and €40 bn based on the estimated profits from the Russian funds in Euroclear over the next ten years and €50 bn-€60 bn over the next 15-20 years. However, the exact amounts of profits heavily depend on future interest rates.
Western divisions regarding Russian money matters for Ukraine, with impending discussions on restructuring debts owed to private creditors in 2024. Those discussions are part of an IMF call to plug holes in a $120 bn-plus plan to support Kyiv in the coming years.
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