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Absolute bullshit move. If we're going to help Ukraine, it shouldn't be by forcing them to take a loan when they're at their lowest, at their moment of highest need. They should just be given the Russian assets and be called a day.
In case anyone wants to argue we aren't "forcing them": if your only options are living amongst the rubble for years and selling your future, you are going to have to sell your future in order to be able to eat today.
France, Germany and the ECB worry about Russian retaliation targeting European assets, and also the potential impact on financial stability and the euro’s status as a reserve currency. There’s concern that depositors from emerging economies may be encouraged to pull money out of western banks, fragmenting the global financial system.
US Treasury Secretary Janet Yellen downplayed such risks in February, arguing that “there are not alternatives to the dollar, euro, yen.” She said that if the G-7 acted together then the group would be representing half of the global economy and all of the currencies that really have the capacity at this point to serve as reserve currencies.
I agree with you, they should just be able to tap the assets directly. Basically some European countries are worried about the effects seizing assets could have on the Euro. Most of these assets are held in Europe as euros. The loan is actually an improvement over the original proposal though. Originally France Germany, etc were pushing only for the 3 billion in interest a year on the assets to be given to Ukraine. The loan solution was pushed by other countries who wanted to give them more cash from the Russian assets as a way to give $50 billion in cash immediately, with those yearly interest payments from Russian assets being used to pay off the loan.
That does sound less terrible.
I do believe a loan is a sign of good faith. Like a "we're here for you. Don't turn on us later, you owe us. Don't forget that." kinda move, geopolitically. It's not like there exist international debt collectors that act on behalf of nation states.
Like socially, I agree with you. But the global stage isn't a highschool cafeteria. That "loan" isn't like a payday loan to a McDonald's employee trying to buy a car.
$50b in interest is an unfathomable amount
Not sure uninvolved parties (ASEAN, African Union, Arab League, ex-UNASUR) are going to be too keen to store significant foreign reserves in USD/Euro given that the seizing of interest payments is apparently something that's in the cards.
I guess there's a reason Saudi Arabia is looking at mBridge... Surely the West can't be happy with what they've been doing in Yemen.
If the war is important, the US and Europe should actually fund it instead of looking for pennies behind couch cushions.
Surely the West can't be happy with what they've been doing in Yemen
we’re literally funding this war. We want it really bad
If the war is important, the US and Europe should actually fund it instead of looking for pennies behind couch cushions.
The war is absolutely important, and profitable to some parties, which may be why we're seeing only enough supplies trickle in to keep it going.
@jeffw are the interests on the frozen assets generating/generated 50 billions of $ ? 🤔
From the article:
When Russia invaded Ukraine in 2022, Western governments froze about $300 billion in Russian assets — including money, securities, gold and bonds — held mainly in banks in Europe.
Leaders of the G7 economies have agreed to use the interest generated by the assets — about $3 billion per year — to help Ukraine.
@mosiacmango so it's around 6 billions = 3 billions/year x 2years, not 50 billions, right?
They're giving Ukraine $50B, as a loan. They're repaying the loan at a rate of $3B/yr using the seized interest payments.
Ah so ukrains not meant to pay it back but it's gonna get paid back by the interest on the Russian money held in international banks. Thanks for the explanation and this is definitely a step up of what I thought it was.
This only works assuming Russia is indefinitely sanctioned... So, either we've just signed ourselves into a second Cold War, or the taxpayer will be responsible for repayment.
This is the best summary I could come up with:
Western leaders have agreed to loan Ukraine up to $50 billion to fight Russia and rebuild after the lengthy war, money that will be repaid over time from the interest accumulating on frozen Russian financial assets, a senior U.S. official told reporters.
When Russia invaded Ukraine in 2022, Western governments froze about $300 billion in Russian assets — including money, securities, gold and bonds — held mainly in banks in Europe.
Leaders of the G7 economies have agreed to use the interest generated by the assets — about $3 billion per year — to help Ukraine.
Scheherazade Rehman, a professor of international finance at George Washington University, explained it in simple terms.
Officials had said the interest generated from the frozen Russian assets would go toward paying back that money.
Rehman said Washington has the weaker hand in the debate because only about $5 billion of the $300 billion in Russian assets are held in the United States — and European nations are concerned about how they would be paid back for a big initial lump sum.
The original article contains 424 words, the summary contains 177 words. Saved 58%. I'm a bot and I'm open source!