G7 in Italy: towards an agreement on Russian assets

In September, a dedicated working group assessed frozen Russian assets at at least $280 billion, including around $200 billion in EU countries, or 71%, compared to $4.6 billion in the United States (2 %).

• In May, a first agreement was reached at European level on the use of exceptional profits generated by Euroclear on the assets of the Bank of Russia. 90% of the total amounts — estimated at 3 billion euros in the first year — will be used to purchase ammunition and weapons, and 10% for non-lethal aid.
• But another arrangement imagined by Washington, more ambitious, consists of using the profits generated by Russian assets as collateral to contract a loan of around $50 billion for Ukraine.
• Such a proposal would have to obtain the agreement of all member states, and is subject to possible changes of position every 6 months, because European sanctions against Russia are renewed twice a year.

From this proposal, a first mechanism, which was discussed by the G7 finance ministers in May in Stresa, consists of the United States providing a loan earmarked towards an institution, which has yet to be defined, which will disburse funds to Ukraine. This same institution would reimburse the United States thanks to the exceptional profits generated by Russian assets frozen at Euroclear in Belgium.

• But an agreement has been slowed by two uncertainties: first, would the Europeans be able to circumvent the need to renew sanctions every six months? Second, who will be responsible for repayment if the profits generated by the frozen Russian assets are not sufficient?
• A second possibility would see the European Commission issue a loan, guaranteed by the European budget. It would still be repaid with profits generated from frozen Russian assets.
• However, in the absence of agreement on who is responsible for repaying the loan if the income generated by the Russian assets immobilized were not sufficient or no longer available, a mechanism in which each member of the G7 would issue a loan based on the size of its economy could be favored.

A political agreement in principle will certainly be announced at the G7 Summit. At Union level, the 27 should discuss the mechanism during the European Council on June 27-28. The technical aspects should be resolved by finance ministers before the end of the year.