A simple principle underlies Thursday’s controversial decision by the United States and its key allies to exploit the profits from Russian sovereign assets to support Ukraine: Moscow must make reparations.
“Russia has to pay,” European Council President Charles Michel told CNBC’s Steve Sedgwick, after leaders of the Group of Seven (G7) major democracies agreed in principle to provide $50 billion of loans to Ukraine, guaranteed by profits generated by around 300 billion euros ($322 billion) of Russian central bank assets frozen by the West.
The G7 includes the United States, Canada, the United Kingdom, France, Germany, Italy and Japan.
US President Joe Biden publicly released the “significant result” of the G7 consensus during a press briefing on Thursday alongside his Ukrainian counterpart Volodymyr Zelenskyy, after the two leaders signed a 10-year bilateral security agreement.
“I am very pleased to announce that this week the G7 signed a plan to finalize and release $50 billion from the proceeds of these frozen (Russian) assets, to put this money to work for Ukraine , (in) another reminder to Putin that we are not backing down,” Biden said.
Moscow has already denounced such a move, warning of dramatic consequences if Western leaders follow through on this proposal. Questions have also been raised about the legality of such a precedent: Russia has been cut off from its frozen assets, but retains ownership of them. A lengthy legal process would have to be initiated for their confiscation – but the profits generated by the seized assets are more easily available.
A step similar to the G7 decision was taken in 1992, when the UN Security Council authorized a measure to seize frozen Iraqi assets and order them to compensate victims of Iraq’s invasion of Kuwait. Baghdad.
Michel stands firm on the reasons for the decision. “There is a blatant violation of international law, there is a blatant aggression against Ukraine. (Moscow) is the aggressor, there is a victim, there are rules at the international level. They must pay,” did he declare.
“And that’s why … this money is blocked, that’s why this money is frozen, and I’m convinced that we can use this money to support Ukraine, because it’s right.”
The proposal must now overcome various legal hurdles and be supported by European states, where the majority of frozen Russian assets are held.
Michel said the G7 allies could finalize details of the deal “in the coming weeks” to make funds available to kyiv as quickly as possible, noting that “an additional 50 billion euros for Ukraine, it means more military equipment and more capabilities and means.” for Ukraine to defend itself and our common European values.”
Other loans guaranteed by interest accrued on frozen Russian assets could be granted, US Treasury Secretary Janet Yellen said on Thursday.
“This is not the last time this can be done. This is the first tranche and if necessary there will be others behind it,” said Yellen, who was actively involved in the negotiations of the agreement. “We are asking the Russians to help pay for the damage caused.”
Russia’s all-out invasion of Ukraine, now in its third year, has destroyed key settlements and infrastructure in the country amid persistent aerial bombardment. The World Bank estimated in February that $486 billion would be needed to cover Ukraine’s reconstruction and recovery over the next decade – with costs having likely increased since that assessment.
Increasingly, kyiv’s allies have come to accept that war must precede peace in discussions over Ukraine’s reconstruction.
“I think if we want to make the reconstruction of Ukraine possible as quickly as possible, we need to provide more air defense systems, this is a top priority,” Michel said. “And today it is also an important decision how we can provide more support and more military equipment to the Ukrainians, including in the field of air defense.”
An official G7 statement is expected Friday evening, capping a two-day summit in Borgo Egnazia in Puglia, Italy, which hosted senior EU officials including Ursula von der Leyen, the president of the European Commission, as well as a number of EU representatives. other heads of state and international organizations.
The annual summit comes as most G7 leaders face their own domestic upheavals, including national elections and falling approval ratings. Only Georgia Meloni, the Italian Prime Minister, tops the polls after the victory of her nationalist Fratelli d’Italia party in the European Parliament elections last weekend.
cnbc
