by Yaroslav Lukiv, BBC News in London • Jean McKenzie, BBC correspondent in Kyiv
The G7 agreed to use frozen Russian assets to raise $50bn (£39bn) to help Ukraine fight invading Russian troops.
US President Joe Biden said it was another signal to Russia that “we will not back down”, but in Moscow President Vladimir Putin said the move was “theft that cannot go unpunished”.
Also at the G7 summit in Italy, Ukrainian President Volodymyr Zelensky and President Biden signed a 10-year bilateral security agreement between Ukraine and the United States, which Kiev praised as “historic.”
The agreement envisions U.S. military and training support for Ukraine but does not commit Washington to sending troops to fight for its ally.
According to the White House, the security agreement means the United States and Kiev will work together to build and sustain Ukraine’s defense and deterrence capabilities, strengthen the country’s defense industrial base, and support economic recovery and energy security.
The security agreement means that in the event of a future armed attack by Russia against Ukraine, there will be consultations “at the highest level to determine appropriate and necessary measures to support Ukraine and impose costs on Russia,” the statement added.
Separately, around $325 billion worth of assets were frozen by the G7 along with the EU following Russia’s full-scale invasion of Ukraine in 2022. Its assets generate approximately $3 billion in annual interest.
According to the G7 plan, that $3 billion would be used to repay annual interest on $50 billion in loans to Ukraine on international markets.
The money is not expected to arrive until the end of the year, but is seen as a long-term solution to support Ukraine’s war effort and economy.
At a joint press conference held at the Apulia summit venue in southern Italy, President Biden said the $50 billion loan “will use that money for Ukraine and send another signal to (Russian President Vladimir) Putin that we will not back down.” He said. “.
The American leader emphasized that Putin “can’t wait for us, he can’t divide us, we will stand together until Ukraine wins this war.”
President Zelenskyy expressed gratitude to the United States and other allies for their unwavering support.
“This is truly a historic day, we have signed the strongest agreement within Ukraine and the United States since independence (1991),” he said of the new security agreement.
The G7 group, made up of wealthy countries including Canada, France, Germany, Italy, Japan, Britain and the United States, has been a significant financial and military supporter of Ukraine as it fights to block Russian troops.
Other G7 leaders also welcomed the $50 billion loan deal, with British Chancellor Rishi Sunak describing it as a “game-changer”.
A $50 billion loan is a lot of money by comparison. US military aid worth $61 billion was finally agreed upon last May..
A senior White House official said the funds agreed upon by the G7 would be used for “a variety of” purposes, including “military support, budgetary support, humanitarian assistance and reconstruction assistance.”
“There will be flexibility in this structure,” the U.S. official added. This is because some countries “prefer to send money to budget support and reconstruction,” while others will “allocate” funds for military support.
Some of those in Kiev who had been demanding this cash wanted the G7 to release the entire $300 billion in frozen funds, not just the accrued interest. The European Central Bank ruled this out.
The bank’s governor, Christine Lagarde, previously warned that such a move “risks disrupting the international order”. Russia will want to respect this.
Unlike the U.S. aid package, which translates directly into sending more missiles to the front lines, this money is unlikely to arrive until the end of the year, meaning it will have little impact on the current course of the war.
For now, Ukraine says it still urgently needs more weapons, including air defense systems and long-awaited F-16 fighter jets to neutralize Russian missile and drone attacks on cities and power plants. This summer.
At the G7 summit, Prime Minister Zelenskyy said the new security agreement includes the United States shipping the fighter jets.
This loan deal is also very symbolic for Ukraine. The aggressors are now forced to pay for Ukraine to defend itself, as well as to repair the destruction they have caused.
One of Zelenskyy’s closest aides said the West’s decision to punish Russia in this way was in some ways a turning point in the war.
However, it is highly unlikely that this loan will enable Russia to turn the war in Ukraine around.
Most of the Russian central bank’s frozen assets are stored in Belgium.
Under international law, countries cannot seize such assets from Russia and give them to Ukraine.
In a speech the day after the G7 decision was announced, Putin pledged that the move would “not go unpunished.”
Moscow says it interprets this as a Western attempt to use money obtained from frozen Russian assets for criminal activities.
In February, Russia’s finance minister said there were “ways to respond” if Western countries seized Moscow’s funds.
European officials previously said European investors held about 33 billion euros worth of funds in Russia.
