Hungary Delays G7 Loan Agreement for Ukraine

By Jan Strupczewski

LUXEMBOURG (Reuters) – Hungary will postpone a final agreement on a $50 billion G7 loan to Ukraine until after the U.S. presidential election. This delay is linked to Hungary's decision on the renewal of EU sanctions against Russia, as stated by Hungary's finance minister.

Washington requires the EU to alter its sanction renewal timeframe from the current six months to every three years to contribute $20 billion to the G7 loan, matching the European Union's input, according to EU officials. The remaining $10 billion will come from G7 nations – Canada, Britain, and Japan, who have already agreed to participate.

The loan, which G7 leaders approved in principle back in June, will be funded through proceeds from approximately $300 billion of frozen Russian central bank assets in Western countries since Moscow's invasion of Ukraine in early 2022.

U.S. officials are concerned about the uncertainty surrounding the potential unfreezing of Russian assets every six months and prefer a more stable backing for the loan.

"We believe that this issue, the prolongation of the Russian sanctions, should be decided after the U.S. elections. We have to see in which direction the future U.S. administration is going with this issue," said Finance Minister Mihaly Varga.

The European Union has maintained that the proceeds from all frozen Russian assets can finance a loan of up to 45 billion euros (~$49.44 billion). As most frozen assets are in Europe, the EU can offer up to 35 billion euros for the G7 loan, adjusted by the U.S. contribution.

Further discussions on this topic will occur at a G7 finance ministers meeting in Washington at the end of October. However, Hungary’s stance means that the final contributions from G7 countries will be determined only after the Nov. 5 election.

(Note: $1 = 0.9102 euros)