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G7 to Use Frozen Russian Assets for $50 Billion Ukraine Loan

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The G7 has agreed to utilize frozen Russian assets to raise $50 billion (£39 billion) for Ukraine to aid in its defense against Russian forces. President Joe Biden emphasized this decision as a signal to Russia that the support for Ukraine remains steadfast. However, Moscow has warned of “extremely painful” retaliatory actions. The funds, anticipated to be available by the end of the year, are intended to support Ukraine’s war effort and economic stability in the long term.

At the G7 summit in Italy, Ukrainian President Volodymyr Zelensky and Biden signed a 10-year bilateral security agreement between the US and Ukraine, which Ukraine hailed as “historic.” This agreement involves US military and training aid but does not commit US troops to combat. It aims to enhance Ukraine’s defense capabilities, support its defense industry, and aid in economic and energy recovery. It also stipulates consultations at the highest levels in case of future Russian attacks on Ukraine to decide necessary support measures.

Separately, about $325 billion in Russian assets were frozen by the G7 and the EU following Russia’s 2022 invasion of Ukraine. These assets generate approximately $3 billion annually in interest. The G7 plan involves using this interest to cover the annual interest on a $50 billion loan for Ukraine, sourced from international markets.

President Biden, at the summit in Puglia, Italy, reiterated that the $50 billion loan would support Ukraine and send a strong message to Russian President Vladimir Putin. Zelensky expressed gratitude for the continued support from the US and other allies, calling the security deal with the US the strongest since Ukraine’s independence in 1991. Other G7 leaders, including UK Prime Minister Rishi Sunak, praised the loan deal as transformative.

The $50 billion loan compares significantly with the $61 billion in US military aid agreed upon in May. A senior White House official noted the loan would support various needs, including military, budget, humanitarian, and reconstruction efforts. While the frozen funds’ interest is seen as a symbolic victory for Ukraine, some in Kyiv had hoped for the release of the entire $300 billion frozen fund. However, the European Central Bank opposed this, citing risks to international order.

The funds from the loan will not immediately impact the war, as they are expected later in the year. Ukraine continues to seek more immediate military aid, such as air defense systems and F-16 fighter jets, which could start arriving in the summer. Zelensky mentioned that the new security agreement includes US shipments of these aircraft.

The loan arrangement symbolizes a significant move where Russia’s frozen assets are repurposed to support Ukraine’s defense. Although this marks a turning point, it is unlikely to change Russia’s stance on the war. Most of the frozen Russian central bank assets are in Belgium, and international law prevents their direct confiscation for Ukraine’s benefit. Russia has condemned the West’s actions as criminal and has hinted at severe retaliatory measures. European investors have around €33 billion stuck in Russia, complicating the situation further.

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G7 leaders to discuss €30bn loan for Ukraine using Russian assets

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The G7 finance ministers are set to discuss whether Ukraine can receive an additional €30 billion loan from seized Russian assets totaling €270 billion. This proposal has sparked division within the G7, particularly between the US and Germany. While some advocate for full asset seizure, others, including Christine Lagarde, ECB president, raise legal and economic concerns.

The US and UK propose mobilizing the frozen assets to provide a substantial loan to Ukraine, with interest paid from the profits of the seized Russian assets. They argue this approach avoids the need for asset confiscation, which could disrupt the international legal order and financial stability.

Belgium, holding the largest share of Russia’s frozen assets within the G7, has already generated significant investment income from these assets. It has agreed to allocate a portion of this profit to a joint G7 fund for Ukraine.

Critics argue that using the assets as collateral for a loan effectively amounts to confiscation. However, some legal scholars suggest that under the doctrine of state countermeasures, seizure may be justified.

Overall, there is contention over whether to provide Ukraine with a substantial loan using the seized assets, with concerns about legal implications and potential repercussions for financial stability and international relations.

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NATO summit to witness G7’s unveiling of a comprehensive security plan for Ukraine

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During the NATO summit, the G7 nations are expected to approve a long-term security agreement with Ukraine. The agreement will encompass provisions for defense equipment, training, and intelligence sharing.

British Prime Minister Rishi Sunak emphasized that this agreement would send a strong message to Russian President Putin. The move comes after Ukrainian President Zelensky criticized NATO for not providing a timeline for Ukraine’s accession to the alliance. Sunak stated that the allies of Kyiv are reinforcing their formal arrangements to ensure long-term protection for Ukraine and prevent a repetition of the brutality it has faced from Russia.

The United Kingdom has played a leading role in this agreement, which involves G7 partners such as Canada, France, Germany, Italy, Japan, and the United States. The details of the agreement are expected to be revealed during the summit.

US President Joe Biden has previously suggested a model similar to the US-Israel agreement, which entails providing Ukraine with $3.8 billion in military aid annually for ten years, but without an obligation to come to Ukraine’s aid during an attack. While NATO stated that Ukraine could join the alliance when conditions are met, Zelensky expressed frustration over the lack of a specific timeframe. Despite the absence of a timeline, diplomats pointed out that a clear path to membership has been established, with the application process shortened significantly.

The focus now shifts to the long-term security guarantees that NATO members will offer Ukraine as an alternative to immediate membership. The summit also saw the announcement of military packages for Ukraine, including the training of Ukrainian pilots to fly F-16 fighter jets, and the UK’s commitment to deliver combat and logistics vehicles to Ukraine.

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SCO summit: Putin says sanctions making Russia stronger

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Russian President Vladimir Putin has reiterated his country’s opposition to Western sanctions following the invasion of Ukraine.

Speaking at the virtual Shanghai Cooperation Organisation (SCO) summit, his first international address since the recent mutiny in Russia, Putin expressed defiance towards the West, stating that Russia would counter external sanctions and pressures while continuing to develop. He emphasized the importance of trade agreements between SCO nations in local currencies, seen as a measure to mitigate the impact of sanctions. Putin also welcomed Belarus’s application to become a permanent member of the SCO. Indian Prime Minister Narendra Modi, hosting the summit, called for increased trade, connectivity, and tech cooperation among member states.

However, he did not directly address the war in Ukraine or China’s assertiveness in the Indo-Pacific, reflecting India’s delicate diplomatic position as it strengthens ties with both the West and China. Instead, Modi urged SCO members to cooperate on countering cross-border terrorism, with his statements commonly interpreted as aimed at Pakistan. China’s President Xi Jinping emphasized the importance of regional peace and security and called for solidarity and mutual trust among SCO members. All members agreed on the need to maintain stability in Afghanistan following the Taliban’s takeover.

The SCO, formed in 2001 by China, Russia, and four Central Asian countries, has gained relevance as relations with the West deteriorate for Russia and China. With around 40% of the world’s population and over 20% of global GDP, the SCO holds significant potential, and the inclusion of Iran as a full member further enhances its energy portfolio.

However, India’s ability to strike a diplomatic balance between its global partners, including Russia, China, and Pakistan, will impact the future of the SCO. Indian diplomats assert their commitment to an independent foreign policy without favoring any particular group.

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