FT: US proposes $50 billion Ukraine loan conditional on EU extending sanctions against Russia until end of war.

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The U.S. has proposed that a £50 billion loan to Ukraine could be repaid by profits from frozen Russian assets, on the condition that the EU agrees to extend sanctions against Russia until it ends the war, the Financial Times reported on June 5, citing a leaked EU discussion paper. Ukraine's Western partners and other allies froze around £300 billion in Russian assets at the start of the full-scale invasion in 2022. Roughly two-thirds are held in the Belgium-based financial services company Euroclear.

After months of debate, EU ambassadors agreed on May 8 that the windfall profits from these assets should be used to fund Ukraine's recovery and military needs. Precise details of the proposed £50 billion loan, such as the interest rate and whether it would be provided directly or through an institution like the World Bank, "remain to be determined," the FT said. One issue with the idea is that the U.S. would potentially be liable "should the profits fall short of required repayments," the FT said.

The biggest issue, however, is that EU sanctions against Russia require an extension every six months, unless renewed by unanimous consent. Washington wants to ensure the sanctions are made indefinite "until the end of the war to ensure the U.S. is not left on the hook for repayments," the FT said. The FT highlighted that such a change to the EU's sanction regime "would require the approval of leaders including Hungary's Viktor Orban, who has jealously guarded his regular veto rights over sanctions decisions."

Budapest has repeatedly opposed Ukraine's accession to NATO and the EU, sanctions on Russia, undermined Western aid efforts for Ukraine, and maintained close relations with Moscow throughout the full-scale war. The FT reported in May that Orban was responsible for holding up EU legislation that would fast-track payments funneled from profits in frozen Russian assets to Kyiv. The proposal is being discussed ahead of the Group of Seven (G7) summit in Italy from June 13 to June 15.

Opinion: Estonia leads the charge on using frozen Russian assets

Estonia's parliament enacted a law on May 15 enabling the use of frozen Russian assets to compensate Ukraine for the damages caused by Russia's war.

Kyiv and its Western allies have discussed using around £300 billion in Russian assets held in Western accounts to support Ukraine.

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