The world has already pledged 297 billion euros ($300 billion) to help Ukraine, but the country clearly needs more.
In April 2024, the US Congress finally approved a €56 billion aid package for kyiv, after months of infighting over whether the money should be better spent on domestic issues. Similar themes emerged in the recent EU election campaign, in which the bloc took a turn to the far right.
The US and EU also struggled to agree on what to do with the $300 billion in Russian Central Bank assets, which were confiscated, as part of Western sanctions, shortly after Russian tanks entered in Ukraine.
“These funds will never be returned to Russia, at least as long as Vladimir Putin is president,” Jacob Kirkegaard, a senior researcher at the Brussels office of the German Marshall Fund think tank, told DW. “However, there is no political or legal will to say it loud and clear,” he says.
A single loan to kyiv
The new plan will use the interest generated on those assets, estimated at a few billion a year, as collateral for a one-time loan of up to $50 billion for Ukraine.
“Ukraine has a huge fiscal deficit, on the order of 20 to 30 percent of GDP,” Yuriy Gorodnichenko, a Ukrainian economics professor at the University of California, Berkeley, told DW. By comparison, Greece’s fiscal deficit at its highest level during its debt crisis reached 13.5 percent.
Gorodnichenko points out that the Government of Ukraine, which needs between 100 and 150 billion dollars a year to manage the country and the war, received almost zero aid in the first two months of the year 2024. That, he points out, “created great uncertainty about how much there is to finance weapons and internal needs.
And worse still, data from the Ukraine Support Tracker, compiled by the Kiel Institute for the World Economy, recently revealed that only half of the latest $61 billion pledged by the Biden administration will go directly to Ukraine. The rest will boost the coffers of the United States Department of Defense. There is also a great disparity in what countries have promised and what they then deliver.
Russian assets frozen for a decade?
This additional $50 billion would be very welcome in kyiv. “If you securitize and issue a bond today based on those future profits, you have to ensure that the underlying assets remain frozen for, say, 10 to 20 years,” Kirkegaard says. “So someone needs to guarantee that these assets will not be returned to Russia in that time. So are we openly saying that Russia will not get its money back and that constitutes a backdoor confiscation?” she questions.
But he also warns that, “if one believes that Ukraine will eventually prevail and need to be rebuilt at some point, then those assets, if they remain locked up or frozen for 10 years, may not be available when reconstruction begins in, say, three years.” to five years.”
Help Ukraine even with Trump
The EU has struggled to make up for a lag in US funding in recent months. In the short term, this commitment will make aid to Ukraine Trump-proof. The former US president promised to cut support for kyiv if he was re-elected in November, but recently toned down his rhetoric.
“The results of the American elections may not be particularly favorable for Ukraine, so they [los líderes del G7] They want to secure financing for at least one more year. Ultimately, however, our European partners need to make a political decision on whether they want to touch the main sum of these Russian assets or not,” says Gorodnichenko.
Only one option, raise taxes
Meanwhile, the Ukrainian government is running out of financing options. kyiv is preparing to increase various taxes, just as Russia does, in order to continue financing its war machine.
“One way or another, Russia will be held responsible for what it does in Ukraine. We can wait 10 years and then transfer money to Ukraine, or we can do it now and be effective,” Gorodnichenko said.
(rmr/ms)
