G7 strikes ‘provisional’ deal on $50bn loan to Ukraine

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G7 negotiators have reached a deal to use profits from frozen Russian sovereign assets to help Ukraine in a bid to shore up support for Kyiv while they grapple with a barrage of domestic political difficulties. 

A deal on a scheme for G7 members to provide “approximately $50bn” to Ukraine backed by the future proceeds from Russian assets was struck by G7 officials, two people involved in the talks told the Financial Times. The financial aid is set to be the centrepiece of the group’s annual summit in the southern Italian region of Puglia. 

Details over its design — including who would bear the ultimate risk of the loan to Ukraine, and how the money would be distributed — were not specified in the agreed statement.

“It’s done. At sherpa level, it is agreed and I do not expect any leaders . . . to block it,” said one of the officials, who declined to be named. “There is provisional agreement . . . but, of course, you need formal approval from the G7 leaders.”

“With a view to supporting Ukraine’s current and future needs in the face of a prolonged defence against Russia the G7 will launch ‘Extraordinary Revenue Acceleration (ERA) Loans for Ukraine’ in order to make available approximately $50bn in additional funding to Ukraine by the end of the year,” the G7 is set to announce, according to an agreed statement seen by the FT.

The financing would be disbursed “through multiple channels that direct the funds to Ukraine’s military, budget and reconstruction needs”, it said.

Russia’s assets would remain immobilised until Russia ended its war against Ukraine and repaid the damage it caused, the statement added.

The deal is expected to be announced later on Thursday when Ukrainian President Volodymyr Zelenskyy joins G7 leaders for a session of the summit.

Earlier on Thursday, Jake Sullivan, the US national security adviser, said leaders were “on the verge of a good outcome” and “a common vision for the way forward” could be announced later in the day.

“I am very confident that an agreement could be made in the hours to come,” Charles Michel, president of the EU Council, who participates in the G7 summit, told reporters on the sidelines of the meeting in separate comments.

The summit comes at a time of political turmoil in a number of G7 countries. The US presidential election is looming in November, with Biden locked in a tough race against former president Donald Trump.

UK elections are set for July 4, with Rishi Sunak expected to be unseated as prime minister and his Conservative party likely to lose to Labour for the first time in 14 years.

Last week’s vote for the European parliament delivered a surge in far-right parties in France and Germany that dealt heavy blows to German Chancellor Olaf Scholz and French President Emmanuel Macron, who called for snap parliamentary elections starting later this month.

An agreement on delivering additional support for Ukraine using the frozen assets would be a sign that G7 leaders remained united in their defence of Kyiv as well as their broader foreign policy priorities, western officials said.

The overwhelming majority of the Russian sovereign assets frozen by western countries in the days following Moscow’s full-scale invasion of Ukraine in February 2022 are held in the EU.

Thursday’s deal came together after the EU and its G7 member states — Italy, France and Germany — balked at a US proposal that EU-generated earnings would underpin a US-issued loan.

Brussels argued that it could not give a cast-iron guarantee that its sanctions — which collect profits on the Russian assets worth about €3bn a year and are rolled over every six months — would remain in place indefinitely, and thus each country would need to assume a slice of the risk.

The World Bank is expected to play a role in the disbursement of the US slice of the loan package, said two people familiar with the talks.