³Ô¹ÏºÚÁÏÍø

The G7 finalised the implementation of its pledge to provide a $50 billion loan to Ukraine by the end of 2024, backed by the immobilised Russian assets across the group. This step represents another novelty in the reaction of G7 members to Russia’s invasion of Ukraine.

While the legal situation and specific mechanisms for accessing financial assets held overwhelmingly inside the EU vary across the G7 members, this is the first time an international coalition has immobilised sovereign assets of a nuclear armed aggressor nation and channelled the income to fund the defence of the attacked nation. Therefore, in principle, the provision of the $50 billion loan to Ukraine will not be a burden for taxpayers either in the G7 or Ukraine, but ultimately will be borne by Russia through the forfeited future income from its sovereign assets.

The final confirmation of the United States’ contribution of $20 billion to the G7 loan further reduces the size of the EU’s potential commitment to roughly up to half of the €35 billion in European Union loans recently proposed by Ursula von der Leyen, and approved by the European Parliament and the EU Council. The $50 billion from the G7, which comes in addition to the €50 billion Ukraine Facility agreed by the European Council in February 2024, will provide crucial financial assistance to Ukraine in the coming months. But continued support from all G7 allies – and especially the US – is not certain and the emergence of new fiscal shortfalls in the coming years in Ukraine cannot be ruled out.

However, the fact that EU leaders quickly approved up to €35 billion in new support for Kyiv, which is well above what will be needed to deliver the G7 pledge, illustrates the ultimate willingness of the EU to provide the financing required to support Ukraine.

The Why Axis is a weekly newsletter distributed by Bruegel, bringing you the latest research on European economic policy.