Germany ready to support US plan to use frozen Russian assets, Bloomberg says

Some German officials are ready to support the US plan to use the income from frozen Russian assets, which are mostly located in Europe, to provide US£50 billion in aid to Ukraine. Source: Bloomberg, citing sources Details: It is noted that Germany's agreement could be a decisive step that brings Washington and its allies closer to securing a new significant aid package for Kyiv and ensures US participation regardless of the outcome of the November elections. 

US and EU officials say the US proposal is gaining momentum and is expected to dominate talks between finance ministers and central bank heads of the G7 countries meeting in Italy.

However, Bloomberg emphasises that German officials do not expect a final agreement until the G7 leaders' meeting on 13-15 June, with implementation of such a mechanism not expected before 2025. In February 2022, G7 countries immobilised about US£280 billion in the assets of the Russian central bank. Most of these assets are held in Europe by the Belgian clearing company Euroclear.

Over the past few months, the US has been pushing to use these assets to aid Ukraine. Options have ranged from direct seizure and transfer of the funds to Ukraine to securitisation for bond issuance or using them to secure some form of loan. Several European countries have met these proposals with scepticism.

Governments led by France and Germany have expressed concerns about the impact of such measures on financial stability and the attractiveness of the euro as a reserve currency, as well as their legality.

The latest US proposal has been received more positively in European capitals, including Berlin, as it involves only using the interest generated by the assets, without seizing the principal amount.

Background:

• The US is negotiating with close partners to provide Ukraine with up to US£50 billion in aid, with the costs to be covered by the profits from sovereign Russian assets.

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