Kiev reveals terms of $20 billion US loan

The Ukrainian government has approved the terms of a conditional agreement with the US Federal Financing Bank (FFB) for a 40-year loan of $20 billion which will be backed by profits from frozen Russian state assets.

It’s part of a broader $50 billion G7 loan deal, which includes a separate $20 billion EU commitment, and $10 billion to be split by G7 members Britain, Japan and Canada.

The money will be transferred to the Facilitation of Resources to Invest in Strengthening Ukraine Financial Intermediary Fund, established by the World Bank on October 10, “for the sake of the state,” a resolution issued by Ukraine’s Cabinet of Ministers on Friday stated.

The transfer will be based on a Certificate Purchase Agreement between Ukraine, the FFB, and the US Agency for International Development (USAID), along with a loan guarantee and repayment agreement between Ukraine and USAID. 

Under the deal, Ukraine’s Finance Ministry will issue a certificate of indebtedness to the FFB, guaranteed by USAID, the government resolution said.

The loan, which has an annual interest rate of 1.3% plus the current average rate for one-year US Treasury bills, will be repaid using interest earned from immobilized Russian sovereign assets.

The US and its allies froze an estimated $300 billion in assets belonging to the Russian central bank following the escalation of the Ukraine conflict in February 2022. In June, G7 members pledged a $50 billion loan for Kiev, with the frozen Russian assets to be used as collateral, to help Kiev buy weapons and rebuild damaged infrastructure. The agreement was finalized in October.

Moscow has repeatedly denounced the asset freeze as “theft” and argued that tapping into these funds would be illegal and set a dangerous precedent. The Russian Finance Ministry has warned that it will initiate retaliatory measures mirroring the West’s actions against resources of Western investors held in the country.

The latest move is part of the current US administration’s last-minute strategy to bolster Kiev’s war effort, which includes a new $725 million military aid package to Kiev and another round of sanctions against Russia. It comes as uncertainty grows over Washington’s commitments under the upcoming presidency of Donald Trump, particularly after US House Speaker Mike Johnson dismissed President Joe Biden’s request to include $24 billion in additional aid to Ukraine in a government funding bill last week.