Photo: Working Visit of the President of Ukraine to Italy to Participate in the G7 Special Meeting Credit: Office of the President of Ukraine

G7 Compromise is Great — But It’s Still Not Enough

After many months of discussion, the world’s great democratic powers have agreed to hand more Russian assets to Ukraine. But the US must press for more.

By Paul Jones

June 13, 2024

G7 leaders are set to agree about $50bn for Ukraine by front-loading earnings from $300bn in frozen Russian sovereign assets, most located in Belgium.

Details of the complex financial arrangement still need to be worked out. The agreement effectively replaces a less generous European Union (EU) decision in May to send smaller amounts of the earnings on frozen assets, which currently amount to about $3bn per year. The $50bn would get Ukraine well past the upcoming US and EU political transitions, obviating the need for another US congressional supplemental until well into 2025.

There is a deal, but the arguments have not ended. The US will continue to seek a transfer of the entire $300bn-plus in frozen Russian assets — not just the windfall earnings — which would make a much greater contribution to what has become a war of attrition. It is not cheap to fund an intensive 21^st-century war along a 600-mile front for a country of around 40 million people.

Russia is now spending some 30% of its budget on defense to overwhelm Ukraine and convince its supporters that Ukraine’s cause is hopeless in the long run.

Pushback has included the US Congress decision, with strong bipartisan support, to pass the REPO Act, which authorized President Biden to seize Russian assets in the jurisdiction of the US — a sum estimated at about $5bn — and urged him to coordinate with the G7, the EU, the UK, Australia, and other partners and allies on using the Russian assets frozen in their countries.

Germany, France, Belgium (the latter holding around $193bn of the funds) and some other European countries have been reluctant to touch the underlying Russian assets out of concern for their reputation for holding foreign reserves, any potential impact on the value of the Euro, and, in the case of Germany, a precedent that could possibly be used by countries claiming World War II reparations.

Other EU countries in Central Europe, the Nordic states, and the UK support immediate mobilization of the entire $300bn.

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Ultimately, these arguments may be moot. The G7 has already agreed that Russia cannot access its frozen assets until it has fully paid reparations for the damage caused in Ukraine, which the World Bank estimated some months ago at some $486bn. Agreement is impossible to imagine from the Putin regime, or from any subsequent Russian government. It’s very unlikely the money will ever be returned.

The delay and political difficulty in passing the $61bn supplemental US appropriation in April and arguments on the EU’s $55bn aid package in February indicate just how difficult it is to ask American and European taxpayers to fund Ukraine when the G7 is sitting on $300bn of Russian frozen assets.

Assuming the G7 compromise agreed on June 13 does not rattle financial markets or other depositors of foreign reserves (such as Saudi Arabia, which has strongly opposed the move), and if the US presidential election campaign looks as uncertain in September as it does now, it’s possible the holdouts in Europe could be convinced to mobilize all $300bn for Ukraine.

That would provide Ukraine with resource certainty for some time, raising the stakes for Russia considerably, and removing a major argument President Trump and his supporters have made – that the US is wasting its money on the war in Ukraine.

Russia responded to the US REPO Act with a Presidential decree last month instructing the government to set up a mechanism to compensate the Central Bank and individuals for the seizure of assets by confiscating private foreign assets in Russia.

Expect Russia also to maximize its rhetoric that the West breaks global rules and norms on the inviolability of foreign reserves (a spurious argument in this situation), which Russia will direct especially at so-called global south countries with reserve deposits in G7 and EU countries.

With this G7 compromise, the Biden Administration has again demonstrated its ability to maintain unity among allies and partners on support for Ukraine — we should recall just how hard this has been, how long it has taken, and the very significant hurdles it faced in Europe.

But that was yesterday’s battle. To win in Ukraine, and in the face of political uncertainties on both sides of the Atlantic, the administration now needs to press for another agreement. It is time to take all of Putin’s money and hand it to his Ukrainian victims.

Ambassador Paul Jones (ret.) is a Distinguished Fellow at the Center for European Policy Analysis (CEPA) and an International Affairs Advisor at Squire Patton Boggs global law firm. He was US Ambassador to Poland (2015-18), US Ambassador to Malaysia (2010-13), and Principal Deputy Assistant Secretary of State in the Bureau of European and Eurasian Affairs (2013-15). He was also Vice President for International Government Relations at Raytheon Technologies (2020-23).

Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.