The G7 model in action: London wants to lend to Ukraine for profits from Russian assets

Britain proposes to provide loans to Ukraine from frozen Russian assets

• London is promoting the idea of a so-called «reparations loan» - of loans to Ukraine secured by revenues from frozen Russian assets, without confiscating the capital itself.

• The mechanism is based on the G7 decision to ERA loan for $50bn, to be serviced by interest/excess profits from Russia's immobilised assets. The UK has already provided Kyiv with £2.26bn in this format, Ukraine received the first tranche in March 2025.

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What happened

The British government reported that is studying the expansion a «reparations loan» instrument - loans to Ukraine secured by the revenues generated by the frozen assets of the Russian central bank and other sovereign funds under sanctions. The idea allows for not to touch the principal amount of assets, but to use the interest income to service Ukraine's debt.

How it works

• The bottom line.Russian assets remain blocked; interest/excess profits (The windfall profits from them are used to pay off loans to Ukraine.

• Legal logicThe use of the proceeds, rather than the confiscation of the hull, reduces legal risks and political objections, particularly within the EU.

What Britain has already done

On 1 March 2025, the UK government announced a £2.26bn loan to strengthen Ukraine's defence capabilities, explicitly stating that maintenance The loan will be repaid from the proceeds of frozen Russian assets. On 7 March, Kyiv confirmed receipt of the first tranche (~$1 billion).

G7 and EU context

• The G7 Summit in 2024 agreed to Extraordinary Revenue Acceleration (ERA) - $50 billion through a number of bilateral loans paid from the proceeds of frozen Russian assets.

• In parallel European Commission promotes a «reparation loan» scheme in the EU (including the option of issuing special bonds) to speed up funding for Ukraine and circumvent possible vetoes.

Why does Ukraine need it?

• Fast liquidity for defence and the budget without waiting for reparations from Russia.

• Projected fundingAsset income comes in regularly, covering interest and principal.

Risks and discussions

• Legal appeals from the Russian Federation and counterparties; the need for clear guarantees for creditors.

• Political sensitivity in some EU countries regarding the impact on financial markets and the precedent for sovereign reserves.

What's next

London and the G7/EU partners are working on the expansion of the «reparations loan» and the technical details (guarantees, SPVs, bond issue parameters). Ukraine will continue to receive funds under the already agreed lines, including the British loan.

Sources.

UK Government; Reuters; Financial Times; Brookings analytical materials.