Two weeks after President Biden reversed himself and approved firing American weapons into Russian territory, he and his closest allies are preparing a different kind of assault, using the proceeds from Russia’s own financial assets to aid the reconstruction of Ukraine.
For two years, the world’s largest Western economies have debated how to deal with $300 billion in frozen Russian assets, which the Kremlin — somewhat inexplicably — left in Western financial institutions after the Ukraine invasion began in 2022.
Now, after long debates about whether the West could legally turn those assets over to the government of President Volodymyr Zelensky of Ukraine, the allies seem on the brink of a compromise, to be announced at the Group of 7 summit in Italy.
The Group of 7, which comprises the world’s wealthiest large democracies, is about to agree to a loan to Ukraine of roughly $50 billion to rebuild the country’s devastated infrastructure, with the understanding that it will be paid back by interest earned on the frozen Russian assets, Western officials said. But even that amount, experts say, would only begin to make a dent in building a new Ukraine.
The financing announcement will be only a part of a summit this week that will range from how to reverse Russia’s new momentum to how to bring about a cease-fire between Israel and Hamas. There will be moments when the leaders will try to lift their eyes beyond the current crises, including a meeting between the leaders and Pope Francis, focused on harnessing the power of artificial intelligence.
And for Mr. Biden himself, who leaves for Italy on Wednesday morning, the summit comes at a fraught moment. For the past three years, Mr. Biden used these summits to declare that alliances were back, with the United States in the lead.
Now, Europe is bracing for the possibility that former President Donald J. Trump, who has spoken openly of pulling out of NATO, could be back in power by the time the group next meets, in 2025. And several of the leaders present — including Prime Minister Rishi Sunak of Britain and President Emmanuel Macron of France — are facing elections that could redefine Europe.
Mr. Biden faces the hurdle of convincing his allies, starting with Mr. Zelensky, that the United States plans to stay in the fight with Ukraine, no matter what happens in November. The extensive delays this spring in getting congressional passage of the $61 billion in new ammunition and air defenses, Mr. Biden’s aides acknowledge, cost Ukraine lives, territory and tactical military advantage.
Mr. Biden told Mr. Zelensky last week, in France, that “I apologize for the weeks of not knowing what was going to pass,” and put the onus on Republicans in Congress. “Some of our very conservative members were holding it up,” he said.
But the scope of the opposition in Congress also raised the question of whether that last injection of a sizable military package could be the last, and threatens Mr. Biden’s claim as the Western leader who rallied the rest of the allies to fend off further assaults by President Vladimir V. Putin.
Now, with the war at a critical moment, the Group of 7 leaders seem poised to end months of deliberations over how to use the $300 billion in frozen Russian central bank assets, which were largely kept in European financial institutions. The idea is to provide an infusion of economic aid to Ukraine.
The Biden administration, after considerable internal arguments, had been pushing to outright seize the assets. But that idea fell flat in Europe, where most of the funds are held, out of concern that it would be a violation of international law.
The European Union did agree to use the interest that the central bank assets have been earning where most of them are held — in Belgium’s central securities depository, Euroclear — to provide Ukraine with about 3 billion euros annually.
But the Biden administration wanted to provide Ukraine with more funds upfront, so it devised a plan to use that interest to back a loan that the United States and other Group of 7 countries could deliver immediately.
The loan could be as large as $50 billion and would be repaid over time with the so-called windfall profits being generated from Russia’s money.
In recent weeks, finance ministers from the Group of 7 have been trying to hash out the complicated details of how such a loan would work, with several outstanding questions still to be answered. Officials have been trying to determine how the money would actually be transmitted to Ukraine, and have discussed running it through an institution such as the World Bank as an intermediary.
It is unclear how the loan would be repaid if the war ended before the bond matured or if interest rates fell, making the proceeds on the assets insufficient to repay the loan.
John F. Kirby, a spokesman for the White House National Security Council, said that he anticipated that there would be “unanimity” at the summit in working toward a plan to use the frozen assets to help Ukraine rebuild after the war.
“At the G7 meeting later this week, our commitment to Ukraine will continue to be right up front and clear,” he said. “We will take bold steps to show Mr. Putin that time is not on his side and that he cannot outlast us.”
Mr. Kirby said that the leaders were expected to build on actions taken over the last two years to immobilize Russia’s sovereign assets and defund Russia’s war capabilities by imposing sanctions and enforcing price caps on Russia’s oil.
John E. Herbst, senior director of the Eurasia Center at the Atlantic Council, and a former U.S. ambassador to Ukraine, said that unlocking the assets was of principal importance for the Group of 7.
“The delay certainly weakened the U.S. position internationally,” Mr. Herbst said of the congressional funding. “It’s also true that the administration has been slow and timid in implementing this policy, because in my judgment, they’ve been intimidated by Moscow’s constant nuclear threats. And as a consequence of that now over two-year-old pattern, the U.S. is not quite perceived as the leader of the West on this issue.”
The leaders are also slated to tackle the question of how to stop China from bolstering Russia by selling it “dual use” microelectronics and other gear to rebuild its military. That question has grown far more urgent in recent months, as Beijing has ramped up its help to Moscow — though it has stopped short of sending actual weapons.
Mr. Biden and the other leaders are expected to announce a series of new sanctions designed to choke off some of those exports, though Russia has proved increasingly expert at evading sanctions.
The unlocking of frozen assets would be “a game changer,” said Evelyn Farkas, the executive director of the McCain Institute at Arizona State University, who previously served as deputy assistant secretary of defense for Russia, Ukraine and Eurasia under President Barack Obama.
Ms. Farkas said that the U.S. delays likely “focused the European mind,” in making European countries think: “OK, we have to come up with alternatives because the U.S. is not reliable.”
“Hopefully,” she said, “they stay focused.”
Alan Rappeport contributed reporting.
