U.S. Treasury Transfers $20 Billion to Ukraine Fund

By David Lawder

WASHINGTON (Reuters) – The U.S. Treasury Department announced on Tuesday the transfer of $20 billion of the U.S. share of a $50 billion G7 loan for Ukraine to a World Bank intermediary fund aimed at providing economic and financial aid to the war-affected nation.

The Treasury noted that this disbursement fulfills its October commitment to match the EU's pledge of $20 billion in support, backed by frozen Russian sovereign assets, along with smaller loans from Britain, Canada, and Japan to assist Ukraine in its defense against Russia's invasion.

The transfer made before President-elect Donald Trump's inauguration in January intends to secure the funds against potential retraction by his administration. Trump has previously expressed concerns about the level of U.S. aid to Ukraine and vowed to swiftly end the conflict without detailing a plan.

The $50 billion loan will be serviced with interest revenue from around $300 billion in frozen Russian assets, which have been immobilized since the invasion began in February 2022. The G7 countries have been deliberating this assistance for several months, concluding terms prior to Trump's election.

Initially, the Biden administration proposed to split the $20 billion into $10 billion for military aid and $10 billion for economic purposes; however, the military portion needed Congressional approval, complicated by Republican gains in the election. With the recent transfer, the entire amount is allocated for non-military applications.

The Treasury stated that the funds were sent to the newly established World Bank fund called the Facilitation of Resources to Invest in Strengthening Ukraine Financial Intermediary Fund (FORTIS Ukraine FIF). The bank's board approved this fund in October, with only Russia objecting.

The World Bank, which cannot manage military funding, has previously operated a similar economic and humanitarian fund for Afghanistan.

U.S. Treasury Secretary Janet Yellen personally oversaw the $20 billion wire transfer to the World Bank fund. In her statement, Yellen emphasized the importance of these funds, stating, "These funds – paid for by the windfall proceeds earned from Russia's own immobilized assets – will provide Ukraine a critical infusion of support as it defends its country against an unprovoked war of aggression."

Yellen added, "The $50 billion collectively being provided by the G7 through this initiative will help ensure Ukraine has the resources it needs to sustain emergency services, hospitals, and other foundations of its brave resistance."

The strength of the U.S. dollar since Trump’s victory on November 5 has slightly reduced the loan's value in dollar terms. According to a G7 loan term sheet, contributions include: EU providing €18.115 billion ($19.1 billion), Canada C$5 billion ($3.52 billion), Britain £2.258 billion ($2.88 billion), and Japan ¥471.9 billion ($3.11 billion).