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Western governments are drawing up plans to issue debt to help finance Ukraine, using Russian resources as repayment backing, in a move that would force Moscow to start paying for its invasion.
According to plans, Kiev’s allies could raise debt to finance the war-torn country. The coalition backing Ukraine would demand that Russia repay the debt and, if it didn’t, would instead seize frozen Russian sovereign assets, according to officials familiar with the discussions.
The Belgian government has distributed the plans to G7 nations, several officials familiar with the proposals told the Financial Times. Officials from two G7 countries said it was now the main option for unlocking frozen funds for Ukraine.
Structuring support in this way would allow the coalition to raise funds for Ukraine without the need to immediately resolve legal questions about other nations’ motives for seizing Russian sovereign assets.
“One of the things this would do is postpone the question of what would happen to Russian sovereign assets, even if they would be used as collateral,” a person familiar with the negotiations told the FT.
The plan would provide “some liquidity to the Ukrainians based on the promise already made by the coalition that Russia will pay,” they said, referring to last year’s G7 pledge in Hiroshima that “Russia must end its war illegal assault and pay for the damage he caused.”
Washington has been pushing its allies to find ways to seize the 260 billion euros in Russian central bank assets that have been tied up abroad in response to Vladimir Putin’s full-scale invasion of Ukraine in 2022. About 191 billions of euros of Moscow’s assets are held in Euroclear, a securities depository bank based in Brussels.
But Paris and Berlin have expressed particular caution because they are concerned about legality, financial stability and possible retaliation.
The German government has said it favors using returns generated by Russian assets held at Euroclear, which amounted to 4.4 billion euros last year. Berlin, however, spoke out against the seizure of the underlying assets. Along with France and the European Central Bank, it has raised concerns that this could have implications for financial stability.
An official involved in the transatlantic discussions told the FT that Belgium had promoted the idea of raising debt against assets in an attempt to build a compromise position.
“Using assets as collateral to raise debt is an attempt to find a compromise between different points of view around the table, both within the EU and across Europe. . . the G7,” the official said.
Alexander De Croo, the Belgian prime minister, said last month that Western countries “need to work on a mechanism” to exploit resources. “For example, they can be used as collateral to raise funds for Ukraine,” he said.
The Biden administration has previously expressed support for a bill currently in Congress that would allow it to “seize Russian sovereign assets for the benefit of Ukraine.”
Last year he released a discussion paper among G7 members that said Ukraine’s allies could “seize Russian sovereign assets as a countermeasure to induce Russia to end its aggression.”
David Cameron, the United Kingdom’s foreign secretary, said in December that he was confident that a legal way could be found to confiscate Russian state assets.