20:47 30.09.2024

EU, G7 need to make political commitment on $50 bln for Ukraine by end of Oct

4 min read
EU, G7 need to make political commitment on $50 bln for Ukraine by end of Oct

Italy, as the G7 presidency, is currently seeking a political commitment from the EU and G7 countries to participate in an initiative to provide Ukraine with $50 billion by the end of 2024 from revenues from frozen Russian assets around the end of October, European Commission Executive Vice-President Valdis Dombrovskis said.

"This will allow all G7 lenders sufficient time to operationalise loans by end of this year… Adopting the proposal by the end of October would allow for the time needed to complete the remaining processes required by the Commission to release the EU loan before the end of the year," he told the European Parliament's International Trade Committee on Monday.

According to him, in such a scenario, the two months remaining until the end of the year will be enough to complete the G7 talks, negotiate and sign the Memorandum of Understanding and the Agreement on Financing Macro-Financial Assistance (MFA) with Ukraine, possibly ratify them by the Ukrainian parliament, verify the fulfillment of the political conditions underlying the MFA, and then make a decision by the European Commission on providing a loan.

"We are now at a critical moment to demonstrate our and the G7 collective commitment to support Ukraine's current and future needs in the face of what is already protracted Russian aggression. This requires a coordinated international effort and it's important that the EU plays its full role in this," the Vice President said.

Dombrovskis said the EU needs to quickly adopt four legislative proposals from the package approved by the European Commission and the EU High Representative on September 20. First, the proposals to set up a Ukraine Loan Cooperation Mechanism and provide Ukraine with macro-financial assistance loan, which is subject to approval by the European Parliament and the EU Council.

The second and third proposals involve directing 95% of excess profits on frozen Russian assets to the EU budget and then to the Ukraine Loan Cooperation Mechanism, and 5% to the European Peace Facility, for which a qualified majority in the EU Council is sufficient.

Finally, the fourth proposal is to amend the sanctions regime on immobilized Russian assets to increase the period of extension of these sanctions from the current 6 months to 3 years, and this decision must be taken unanimously by the EU Council.

Dombrovskis specified that the proposed EUR 35 billion MFA loan with an automatic adjustment mechanism depending on the amounts provided by other G7 partners will be broadly similar to previous macro-financial assistance loans.

In particular, the allocation of funds under it and the control system will be tied to the fulfillment of the conditions specified in the Ukraine Plan within the Ukraine Facility. The difference will be that this loan does not have to be repaid by Ukraine, but will be serviced and repaid at the expense of excess profits on frozen Russian assets.

The Vice President said now each G7 partner is working to implement its own obligations. "There are already clear commitments from Canada, the UK and Japan to come on board," he said.

According to Dombrovskis, the United States said the amount they allocate depends on the EU extending the sanctions period.

"In the absence of such a change, the US can still join the initiative, but with a much lower amount. We believe that the proposal of changing the sanctions regime would be sufficient to get the US on board, but this proposal requires unanimity in the Council. While the Commission hopes that this will be achieved, it is not a certainty at this stage. So this is something that still requires some further work," he said.

The Vice President said any amount that the G7 creditors undertake to provide in excess of EUR 10 billion will reduce the EU's EUR 35 billion macro-financial assistance by the same amount.

"Discussions will also continue at G7 level in the coming weeks," Dombrovskis said.

As reported, the government's draft state budget of Ukraine for 2025 envisages external financing of $38.4 billion, of which experts currently say that approximately $15-20 billion have been confirmed. The calculation is made to receive $50 billion within the G7 initiative, especially since, unlike the previous macro-financial assistance, part of the funds under the new mechanism can be directed to military needs.

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