Britain announced it contributed £2.26 billion (almost $3 billion) to the G7 Extraordinary Revenue Acceleration (ERA) Loans to Ukraine scheme, in which $50 billion from G7 countries will be delivered to Ukraine and repaid to the lenders from profits on immobilized Russian sovereign assets.
“Today the UK has announced its contribution to the scheme and will introduce domestic legislation in the coming weeks to enable the transfer of the new funds to Ukraine as quickly as possible,” the press release said.
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The contribution is provided on top of the UK’s existing £3 billion a year military aid for Ukraine. This loan can be invested in budgetary support, but also in air defense, artillery and wider equipment support for the Armed Forces.
“This new money is in Britain’s national interest because the frontline of our defense – the defense of our democracy and shared values – is in the Ukrainian trenches. A safe and secure Ukraine is a safe and secure United Kingdom,” Chancellor of the Exchequer Rachel Reeves said.
What is ERA? ()
The $50 billion G7 Extraordinary Revenue Acceleration (ERA) scheme was first announced at the G7 Leaders’ Summit in Apulia, Italy, in June.
The loan is backed by profits from frozen Russian assets of around $280 billion, as a compensation for Ukraine to support its finances after Russia invaded the country in February 2022. To date it is assessed that the an overall damage caused reached $411 billion as at Feb. 24, 2023, according to the World Bank’s Rapid Damage and Needs Assessment (RDNA2).
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On Oct. 10, the Council of the European Union reached an agreement on a financial assistance package to Ukraine, including an exceptional macro-financial assistance (MFA) loan of up to €35 billion and a loan cooperation mechanism that will support Ukraine in repaying loans of up to €45 billion provided by the EU and G7 partners.
The repayment of the MFA loan will be ensured by funds coming from future flows of extraordinary revenues stemming from the immobilization of Russian sovereign assets.
The European Council now plans to adopt the regulation as a written procedure, as the European Parliament adopted the text of the decision in first reading. The EU wants to make the MFA loan available in 2024, with disbursement in 2025, to be repaid over a maximum period of 45 years.
Previously, Roksolana Pidlasa, the chair of the Ukrainian parliament’s budget committee, wrote on Facebook that the EU wants to disburse the cash as a “20-20-10” formula: the EU provides $20 billion, the US provides $20 billion, and the remaining $10 billion comes from the UK, Japan, and Canada. “These funds would be returned to creditors using profits from Russian assets,” she wrote.
But the US expects the EU to extend the freeze on Russian assets for at least a further three years. Currently, the freeze is renewed every six months and is at a constant threat because of Hungary’s power to use its veto against the decision.
Pidlasa also worries that despite the total amount of frozen Russian assets being almost $300 billion, Ukraine will only get a loan backed by its profits once and there will be no other financial allocations.
“There are no similar agreements for the future. If we spend most of it in one year, we could face a problem in 2026 with no funds for non-military expenses. That’s why I advocated for spreading the $50 billion over two years,” she wrote
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