Why Using Russian Assets to Fund Ukraine Is Fraught

The US and its allies have found a way to fund Ukraine’s war effort by tapping Russian assets parked in their banking systems. The accord, set to be agreed at the Group of Seven summit in Italy, follows years of wrangling over how to use the Russian funds without engaging in a legally questionable asset grab. Washington pushed initially for an outright seizure to help Ukraine’s fightback and support its shattered economy, but some European leaders were wary this could set a dangerous precedent. The solution they devised involves making use of the profits generated by the frozen Russian funds without taking ownership of the assets themselves.

Instead of seizing the assets and handing them over to the government in Kyiv, the G-7 group of wealthy nations will keep them in their central banks but provide loans to Ukraine that would be paid off using the proceeds generated by the assets over time, according to people familiar with the matter. Those proceeds are estimated to be worth between €3 billion and €5 billion ($3.24 billion-$5.4 billion) annually.