The United States has offered to raise tens of billions of euros of debt for Ukraine under the pledge of future profits from Russian state assets frozen by Western countries, the British newspaper Financial Times reports, UNN writes.
Details
The G7 group of countries is reportedly divided over what to do with 260 billion euros worth of Russian assets frozen by the West since Moscow launched its full-scale invasion of Ukraine in February 2022.
"Washington has supported the idea of a complete confiscation of reserves and their transfer to Ukraine. European officials fear that this idea could violate international law and destabilize financial markets. The EU countries would prefer to give Kyiv only the profits earned from the underlying assets," the newspaper notes.
However, the issue of using Russian reserves to help Ukraine has become more relevant in recent months, as the war has been going on for three years and additional US aid to Ukraine has been delayed in Congress.
"We are at a point where we should explore all possible avenues to maximize the value of the immobilized reserves for Ukraine. We can't wait forever, we know that," Deputy National Security Advisor for International Economic Affairs Dalip Singh said in Kyiv on Wednesday.
Singh said that the US proposal would involve transferring "the present value of the future interest stream to the immobilized assets either through a bond or a loan.
He noted that the Europeans had already demonstrated their willingness to transfer interest from their reserves to Ukraine every two years. However, there were ways "to increase the value of these income streams over time.
"Instead of just transferring a year's profit from the reserves... it's conceptually possible to transfer 10 years of profit or 30 years of profit," he said. - "The present value of those profits adds up to a very large number.
The proposal is due to be discussed by G7 finance ministers on the sidelines of the World Bank and IMF spring meetings in Washington next week, and Singh said the goal would be to reach a decision on the issue at the annual G7 leaders' summit in June, the newspaper writes.
If the US is added to the EU's proposal, the newspaper writes, "a possible compromise would be to use part of the profits for weapons purchases and reconstruction, and part to cover the debt.
"Imagine that you have €1 billion of usable revenue from these revenues. You can allocate €300 million for reconstruction, €300 million for Ukraine's self-defense, and €300 million to secure the issue of loans." . . You can make small pockets out of this amount and distribute it for different needs," the EU diplomat said, warning that negotiations on all these ideas are still ongoing.
One of the big advantages of the American idea is that it will allow Ukraine to get more money up front.
A European official said the bonds could generate between €30 and €40 billion, based on estimated returns from Russian funds in Euroclear over the next 10 years, and between €50 and €60 billion over the next 15 to 20 years. However, they cautioned that this is highly dependent on future interest rates.
"These simulations are more or less reliable for one year, and then you have to watch. You really need to be careful," the official said.
"But officials in one major EU country asked what would happen to bonds backed by 10-year interest payments on confiscated Russian assets if the war ended in a few years and the assets were unfrozen and returned to Russia under a peace agreement," the newspaper writes.
According to officials, the G7 countries could back the bonds with a government guarantee as a way to reassure private investors. However, they warned that such a move could be subject to legal challenge in some states.
The West's disagreement over the use of frozen assets has implications for Ukraine's upcoming debt restructuring negotiations with private creditors this year, which are part of an IMF call to close more than $120 billion in financing gaps for Ukraine in the coming years, the newspaper notes.
Ukraine is reportedly "seeking to close a deal to restructure its debt by the middle of this year, before the 2022 payment deferral granted by bondholders expires.
Many bondholders are reportedly in favor of a restructuring this year. They see it as a critical step for Ukraine to eventually return to global markets to raise money, which they say could be secured by confiscated Russian assets in the future.
Western partners "should work with Ukraine to restructure its private and public debt. Disclosing the value of Russian assets will strengthen these efforts, not replace them," Singh said.