Ukraine Receives First Tranche of EU Loan Backed by Frozen Russian Assets

Ukraine received €3 billion ($3.09 billion) from the EU in the form of a loan financed by the proceeds of $210 billion of frozen sovereign Russian assets.

This first tranche of the G7’s Extraordinary Revenue Acceleration (ERA) loan initiative is designed to make Russia pay for launching its full-scale war in the country, using assets immobilized after the February 2022 invasion began.

Following months of negotiations, the G7 countries agreed to a mechanism to enable payments from these assets and the ERA initiative aims to provide Ukraine with $45 billion. The EU’s contribution will amount to €18.1 billion ($18.5 billion).

Proceeds will go to Ukraine’s state budget, the Ministry of Finance reported on Friday. In particular, they will be used defense spending, social wages, supporting macroeconomic stability and rebuilding critical infrastructure”, Minister of Finance of Ukraine Serhii Marchenko said.

“I am grateful to our EU partners for implementing a mechanism that compels Russia to pay for the damage it has inflicted on Ukraine,” the press release quoted Marchenko as saying.

Frozen assets of the Central Bank of Russia held in the EU amount to €210 billion, representing the majority of such immobilized assets globally, the ministry wrote.

Depending on interest rates, annual revenues from these assets are currently estimated at €2.5–3 billion, the press release said. The total amount of Russian assets vary from $210 billion to $300 billion.

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All but $5 billion, which are located in the US, are held in Europe. A total of $191 billion of Russia’s central bank assets are held by Euroclear, a clearing house situated in Brussels. In February, it reported €4.4 billion ($4.75 billion) of interest had been generated by the funds which could provide Belgium with €1.08 billion ($1.17 billion) in taxes, according to The Guardian.

The G7 countries have still not agreed on a policy that will allow the confiscation of all assets, but they have assured the Ukrainian government that the assets will be unfrozen only after Russia pays appropriate reparations to Ukraine.

Of the €45 billion ($46 billion) loan facility, $40 billion is already signed on paper. Britain announced it contributed £2.3 billion (almost $3 billion) which can be allocated to military purposes. The US agreed to provide $20 billion.