Russia's frozen funds : How the U.S. plans a $20 billion boost for Ukraine

On Wednesday, October 23, 2024, Washington announced a contribution of 20 billion dollars in favor of Ukraine, a decision with heavy consequences that relies on the use of frozen Russian assets. Indeed, this measure is part of a broad G7 program aimed at supporting the Ukrainian war effort and maintaining economic pressure on Moscow. As the year 2025 approaches, negotiations around these frozen funds reveal the complex stakes of a conflict that redefines international alliances and financial priorities.

Washington is set to unlock 20 billion dollars for Ukraine

The American Treasury Secretary, Janet Yellen, confirmed that the United States is about to finalize a loan of 20 billion dollars intended for Ukraine. This financing comes directly from the interest generated by frozen Russian assets as part of the sanctions imposed following the invasion of Ukraine. “We are very close to finalizing this agreement, only a few details remain to be settled,” she said during a press conference held during the meetings of the IMF and the World Bank. This financial assistance is part of a larger G7 commitment that anticipates a total support of 50 billion dollars for Ukraine, expected before the end of the year.

Such a loan relies on an innovative mechanism where the interest produced by 300 billion euros of frozen Russian assets will serve as collateral. Approximately 3 billion euros per year are thus generated by these assets, which provides crucial liquidity to finance the Ukrainian war effort and prepare for the country’s reconstruction. This mechanism also helps relieve American taxpayers, as emphasized by Yellen: “The funding source for these loans is not the American taxpayer, but the revenue from the Russian sovereign assets mobilized in Europe”.

The G7 in search of strategic unity around aid to Ukraine

Beyond the American contribution, other G7 countries play a key role in this international financial mobilization. During the G7 meetings last June, leaders agreed to use frozen Russian assets in their respective jurisdictions to support Ukraine. In Europe, approximately 280 billion euros of Russian assets have been immobilized, primarily in Belgium, within the Euroclear depositary. The European Parliament even approved an additional loan of 35 billion euros for Ukraine, funded by the profits generated by these frozen assets. Thus, “Russia must pay for the destruction of Ukraine,” asserted Swedish MEP Karin Karlsbro.

Economic sanctions do not stop there. Janet Yellen also announced a new series of harsh upcoming sanctions, targeting intermediaries in third countries that provide equipment to Russia for its army. This strategy aims to strengthen Russia’s economic isolation and limit its military capabilities.

As Ukraine continues to benefit from massive financial support from G7 countries, the question of the sustainability of these measures arises. Relying on frozen Russian assets helps avoid tax pressure on the citizens of donor countries, but this strategy may face long-term legal and technical challenges. Furthermore, the intensification of sanctions against Russia could provoke unpredictable reactions from Moscow, further complicating the international situation. Additionally, the use of cryptocurrencies, specifically Bitcoin, is one of the means employed by Russia to circumvent sanctions.