U.S. and European officials are struggling to honor their pledge to use Russian assets to aid Ukraine.
A long-awaited plan to help Ukraine rebuild using Russian money is in limbo as the United States and Europe struggle to agree on how to construct a $50 billion loan using Russia’s frozen central bank assets while complying with their own laws.
The fraught negotiations reflect the challenges facing the Group of 7 nations as they attempt to push their sanctions powers to new limits in an attempt to punish Russia and aid Ukraine.
American and European officials have been scrambling in recent weeks to try to get the loan in place by the end of the year. There is added urgency to finalize the package ahead of any potential shifts in the political landscape in the United States, where support for Ukraine could waver if former President Donald J. Trump wins the presidential election in November.
But technical obstacles associated with standing up such a loan have complicated matters.
Group of 7 officials grappled for months over how to use $300 billion in frozen Russian central bank assets to aid Ukraine. After European countries expressed reservations about the legality of outright seizing the assets, they agreed that it would be possible to back a $50 billion loan with the stream of interest that the assets earn.
The solution was intended to provide Ukraine with a large infusion of funds without providing more direct aid from the budgets of the United States and European countries. It also allowed western allies to make use of Russia’s assets without taking the step of actually spending its money, which many top officials in Europe believed would be illegal.
But differences in the legal systems in the United States and in Europe, which both plan to provide the money up front, have made it difficult to structure the loan.
The European Union, where most of Russia’s central bank assets are held, is required to renew the sanctions that have frozen Russia’s assets every six months.
Because of this E.U. law, the White House’s Office of Management and Budget has determined that there is a certain amount of risk associated with the loan and that, unless the E.U. changes its sanctions laws, Congress must approve additional funding for Ukraine to account for that risk. But securing additional funding for Ukraine is logistically and politically unlikely, leaving the loan in limbo.
“They thought a big, nice, shiny announcement would force the bureaucrats to find a way, and here we are three months later,” said Charles Lichfield, deputy director of The Atlantic Council’s GeoEconomics Center.
E.U. officials have been reluctant to change their sanctions laws to accommodate the United States because doing so requires the support of all 27 member nations. Europe could put forward the entire loan, and some officials there have suggested that it do so, but the United States believes that it is important for the Group of 7 to act in unison.
In recent days, European officials have been discussing the possibility of extending the sanctions review period to 12 or 36 months. While that would reduce the costs that the United States would incur in backing the loan, Congress would still most likely need to approve new money or redirect existing funds because of the risk that the sanctions might not be extended.
“Like U.S. officials, I’m disappointed that Europeans effectively took the summer off after making this commitment and only really started to address this topic this month,” said Philip Zelikow, a State Department official in both Bush administrations and a senior fellow at Stanford University’s Hoover Institution. “And some are creating new obstacles, for reasons that will not withstand much scrutiny.”
Mr. Zelikow, who has called for the United States to use the Kremlin’s assets to rebuild Ukraine, added, “Russia is counting on winning a war of attrition, including against Ukraine’s economy.”
The United States has provided about $175 billion in aid to Ukraine since Russia’s invasion began in early 2022. With the war showing no signs of abating, the International Monetary Fund expects Ukraine’s economy to slow in the second half of the year and for inflation to spike as attacks on its energy infrastructure persist.
The I.M.F. this month agreed to give Ukraine access to another $1.1 billion in financial assistance as part of a lending program that it approved last year.
A senior Biden administration official, who requested anonymity to speak about internal discussions, said that the United States needed assurances that codify the commitments of the Group of 7 leaders, who had agreed that Russia’s sovereign assets would remain immobilized until the war ends and until Russia repays Ukraine for the damage it had caused. Another senior U.S. official said that there was urgency to reach an agreement with Europe in the next few weeks and noted that the differences were more technical than ideological.
The loan has been difficult to devise because of a variety of risks associated with it. For instance, falling interest rates could diminish the value of the returns on the frozen Russian assets, most of which are held in Europe.
U.S. officials have looked into different scenarios for accounting for that risk. Although about $5 billion of Russian central bank assets are held in the United States, the Biden administration is not prepared to seize those funds to back the loan.
A spokeswoman for the Office of Management and Budget said that some of the funds that Congress had already allocated to support Ukraine could be used to cover potential costs associated with the loan. However, it is not clear if redirecting those funds for that purpose would require congressional approval.
The deliberations over the funds come as fighting between Ukraine and Russia is intensifying and as President Biden is on the verge of clearing the way for Ukraine to launch long-range Western weapons deep inside Russian territory.
The U.S. election in November is also weighing on the fate of Ukraine. At a presidential debate last week, Mr. Trump would not say if he wanted Ukraine to win the war and would only reiterate that he would work to swiftly end the fighting.
“It’s about getting it done before the election,” Mr. Lichfield said of the loan. “So the $50 billion is there to replace the U.S. if need be.”
Germany will provide Ukraine with an additional EUR100 million in aid this winter, Reuters quoted the country’s Foreign Minister Annalena Berbock as saying.
During a visit to Moldova on Tuesday, she said that Russia continues to attack the Ukrainian energy infrastructure and is planning a “winter war to make the lives of people in Ukraine as horrible as possible.”
As reported, Russian Federation fired 127 missiles and 109 attack drones on the territory of Ukraine on August 26, 2024. The NEC Ukrenergo recognized this attack on energy facilities as the most large-scale one since the beginning of the war.
At the same time, Russian attacks on the Ukrainian energy infrastructure are recorded almost daily.
Gold continues to rise in price and break records on the back of a weaker US dollar and on expectations of a significant interest rate cut by the Federal Reserve this week. Based on futures quotes on the rate level, the probability of its reduction by 50 basis points (bps) by the Federal Reserve is estimated by the market at 67% compared to 25% a month ago, according to CME FedWatch.
In addition, demand for gold as a safe-haven asset has intensified following the second assassination attempt on U.S. Republican presidential candidate Donald Trump last weekend, Trading Economics noted.
“A fragmented world laden with geopolitical risks and debt will continue to support the price” of gold, notes Ole Hansen, head of commodities strategy at Saxo Bank.
Analysts Goldman Sachs confirmed their forecast, according to which the precious metal may rise to $ 2700 per ounce in early 2025 due to lower interest rates in the U.S. and increased demand for gold from the Central Bank of emerging market countries. However, they noted that if the Fed raises the rate by only 25 bp, prices for precious metal may show a short-term pullback, Bloomberg reports.
Experts of the Australian bank ANZ also expect prices to rise to $2700 per ounce in the near future.
Quotes of October gold futures on the Comex exchange are now $2588.7 per ounce, which is $3.5 (0.1%) above the level at the close of the previous session. Since the beginning of this year, the precious metal has risen in price by more than a quarter.
The volume of marketable products of Kyiv Cardboard and Paper Mill (Kyiv KBC, Obukhiv, Kyiv region), the leader of the industry in Ukraine by this indicator, in January-August 2024 amounted to almost 5 billion 112 million UAH, which is 3.4% more than in the same period of 2023, according to the statistics of the association “UkrPapir”. As reported, the mill has moved to positive dynamics of production volume following the results of the first quarter, while in January-February there was a slight decrease in this indicator.
According to the statistics of UkrPapir, provided to the Interfax-Ukraine agency, in physical terms, the production of corrugated boxes at the mill slightly decreased to 147.8 million square meters, which consistently remains the best indicator in the industry.
Cardboard output decreased by almost 8% to 102.4 thousand tons, including production of containerboard decreased by 7.7% to 84 thousand tons and boxboard by 8% to 18.4 thousand tons.
Production of base paper for sanitary and hygienic products increased by 6.4% to 30.9 thousand tons, and the output of toilet paper in rolls increased by 6.3% to 175.3 million pieces.
The mill is steadily leading in the production of toilet paper in Ukraine – in the first eight months of 2024, the main enterprises of the industry produced a total of 422.4 million rolls, which is 7.2% more than in the same period last year.
According to the association’s data received from the main industry enterprises, in January-August 2024 in Ukraine the output of paper and cardboard increased by 3% by the same period of 2023 – up to 390.5 thousand tons, cardboard boxes – by 17%, up to 384.3 million square meters.
Kiev KBC is the parent company of the group of companies of the same name, one of the largest enterprises in Europe for the production of cardboard and paper products with a staff of more than 2.5 thousand people.
It has, in particular, a cardboard production facility with a capacity of 240 thousand tons per year and a corrugated packaging plant with a capacity of 355 million square meters, as well as a production facility for base paper and finished products with a capacity of 70 thousand tons of base paper annually.
According to the mill, since 2022, the Austrian owner Pulp Mill Holding GMBH has invested almost EUR15m in production modernization projects, and over EUR 360m over the entire period.
As reported, in 2023 the mill produced UAH 7 bln 568 mln worth of products, which is 1.8% more than a year earlier.
Prometey Group of Companies has decided to close three of its 28 grain elevators, as well as to reduce its workforce, which currently numbers more than 1,200 people, according to the company’s website.
“In the third year, the war reached Prometey Group of Companies as well. For the first two years we worked with the resources of the pre-war period, but this could not last long. The problems began with the start of the full-scale invasion. We lost seven grain elevators, 2 thousand hectares of land were under occupation. Of course, business suffered a lot. We realize that it will not be the way it was. But we have done and are doing everything possible to establish the work of the company,” – the press service quotes the head of the business development department of the company, Elena Zinovieva.
In “Prometheus” noted that the support of the domestic agro-sector continued only at the beginning of the full-scale invasion. Over time, bank credit programs for the company began to be cut, as a result of which investments in agriculture had to be reduced.
“There is significant pressure on the business from the IRS. Blocking of tax invoices, non-recovery of VAT and unjustified fines have become commonplace for the companies of Prometey agricultural holding. Now two companies of the holding are forced to defend their rights in courts because of illegal actions of tax authorities,” the report adds.
The company hoped for a good harvest in 2024, but the summer in Ukraine was the hottest in the last 100 years. According to the company’s chief agronomist Ilya Troitsky, the harvest of many crops suffered significantly because of this. Although wheat was able to be harvested under favorable weather conditions, yields of soybeans, lentils and sunflowers, which occupied about 7,000 hectares, were extremely low due to the dry summer.
“Despite the difficult conditions Prometey agroholding continues to fight for its survival. However, if the situation does not change soon, the company will have to make radical decisions to save its business,” the report summarizes.
Source: https://prometey.org.ua/post/prometey-borotba-za-biznes-pid-cas-vijni/
