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G7's pledge to withhold Russian assets may actually cloud Ukraine reconstruction outlook, IMF official says

Photo by Christine Roy / Unsplash

By Adam Brown

Ukraine Rebuild Newswire Editor

Pledges by Western leaders to withhold frozen assets from Russia until the country pays for damage to Ukraine may offer moral support to Ukrainians but they have the effect of clouding the outlook for reconstruction funding, a senior International Monetary Fund official said.

The subtext to the comments suggests that, while the leaders won't be handing the assets back to Russia any time soon, they won't be devoting them to the reconstruction of Ukraine either, said Vladyslav Rashkovan, alternate executive director of the IMF.

"There have been several steps taken in the direction of Russian assets and not all of them were positive for Ukraine," Rashkovan said at an online discussion hosted by the U.S.-Ukraine Business Council (USUBC) on Wednesday, which Ukraine Rebuild Newswire attended.

"First, during the London conference (in June) the British Prime Minister (Rishi Sunak) mentioned that they decided in the UK that they will not return money to Russia until the Russians pay reparations," he said. "Unfortunately during the G7 finance ministers meeting in Marrakesh in October the G7 ministers supported the same approach."

Last week, a G7 meeting of foreign ministers of Canada, France, Germany, Italy, Japan, the UK and the US, plus a representative of the European Union, reiterated the pledge made by G7 finance ministers in October:

"We reaffirm that, consistent with our respective legal systems, Russia’s sovereign assets in our jurisdictions will remain immobilized until Russia pays for the damage it has caused to Ukraine," the foreign ministers said in Japan.

Some $280 billion in frozen Russian assets have been held by Western nations since the Russian invasion of Ukraine in February of last year, mostly at Belgian clearing house Euroclear.

While many of Ukraine's allies want the money used to help rebuild the country, a project likely to cost hundreds of billions of dollars, others say the permanent confiscation of such assets would threaten the reserve currency status of the euro and the dollar as other countries fear the West could seize their reserves as well.

Rashkovan, who represents Ukraine and 14 other states on the IMF Executive Board, said that a bill approved on Nov 8 in the House Foreign Affairs Committee of the US Congress could work in Ukraine's favor on the matter.

The bill, passed 40-2 at the committee level, calls on the US government to hand over the frozen Russian assets it holds, thought to total about USD 8 billion, to Ukraine.

Also, in Europe, political leaders last month called on the European Council to come up with proposals to help pay for the reconstruction of Ukraine with seized Russian assets.

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