Ukrainian success at the G7 Summit: use of windfall proceeds from Russian sovereign assets, security pacts with the USA, Japan

The 50th anniversary G7 Summit was held from June 13 to 15, 2024 at Borgo Egnazia in the city of Fasano in Apulia, Italy. Ukrainian President Vodymyr Zelensky attended the gathering among other invited participants. The first day of the event saw the signing of important agreements for Ukraine.  

In particular, President Zelensky signed two 10-year security agreements. One is with the United States, signed by President Joe Biden, which reaffirms the unwavering U.S support for Ukraine as it is fighting for its sovereignty and territorial integrity. And that support is not with words only, but with deeds as well, as the document contains a number of specific commitments (see below for details), including new air defense systems.

The second security agreement was signed with the Prime Minister Fumio Kishida of Japan, which addresses security and defense assistance; humanitarian, technical, and financial coeration; joint work on the implementation of the Ukrainian Peace Formula provisions, sanctions against the Russian Federation and prosecuting Russia’s leadership for the war against Ukraine. Moreover, Japan has committed to provide Ukraine with USD 4.5 billion worth of aid through 2024.

Another decision of importance for Ukraine was a plan announced by G7 leaders to provide Ukraine with USD 50 billion in new financing by bringing forward the interest earned on immobilized Russian sovereign assets held in the Eurean Union and other jurisdictions.  Leaders reaffirmed their commitment that Russia’s sovereign assets within G7 jurisdictions will remain immobilized until Russia ends its aggression and pays for the damage it has caused to Ukraine. This new financing will provide critically needed support for Ukraine’s military, budget, and reconstruction needs. 

G7 Summit participants

The governments of the United States, United Kingdom and Canada last week issued a sweeping set of new sanctions and export contr measures, guided by G7 commitments to intensify the pressure on Russia for its war against Ukraine.  Foreign banks now face increased sanctions risk when they deal with Russia’s war economy.  New sanctions on more than 300 individuals and entities in Russia, the Pele’s Republic of China (PRC), and globally target Russia’s financial infrastructure; over a dozen international evasion and procurement networks; Russia’s future energy, metals, and mining revenues; and Russian elites invved in the deportation or so-called re-education of Ukrainian children.  The U.S. Administration also announced steps to restrict access to certain U.S. software and information technogy services, to crack down on diversion of goods through shell companies, and to more extensively restrict exports to entities that supply Russia with U.S.-branded items produced abroad. This has already affected the ruble’s exchange rate versus the US dlar, which has plummeted to 200 against the dlar from less than 90 the day before.

Ukrinform has requested experts to assess the G7 Summit results insofar as they pertain to Ukraine, particularly the significance of the bilateral security agreement with the USA.

THE FIRST DAY OF THE SUMMIT WAS IN THE SIGN OF UKRAINE'S VICTORY AND RUSSIA'S DEFEAT

"Not only did this summit reaffirm the most influential Western countries’ sidarity with Ukraine and the priority the G7 group of the world’s most industrialized nations are giving to Ukraine aid. It made a very important decision for us – the G7 leaders agreed to provide Ukraine with USD 50 billion in new financing by leveraging the windfall proceeds from sanctioned Russian sovereign assets held in the Eurean Union and other jurisdictions," Vodymyr Fesenko, Chairman of the Board of the Center for Applied Pitical Studies "Penta" said in a comment to Ukrinform.

“It is vitally important for Ukraine to sustain financial stability in the year to come. This is the first step toward using frozen Russian assets to support Ukraine,” he went on to note.

President Vodymyr Zelensky of Ukraine and Prime Minister Fumio Kishida of Japan signed a bilateral Agreement on support for Ukraine and intergovernmental coeration

"On the margins of the Summit, two security agreements were signed – with the USA and Japan. We already have similar agreements with each and all of the G7 Group nations. This was made possible by the persistence of Ukraine, who suggested this format for coeration and security aid to our country as early as in the fall of 2022. This also meets the commitment made by G7 leaders at the NATO Vilnius Summit in July 2023," added Mr. Fesenko.

Pitical analyst Petro eshchuk: This Summit was rich in significant events

"In terms of the diplomatic and pitical content, this is undoubtedly the signing of new security agreements. I will talk about the USA later. But about Japan… We are talking about a nation located far away from Ukraine, in another part of the world, which is not a member of NATO or the EU, that’s to say, it is not among the traditional partners of our state. Even so, Japan signs a security agreement with us. This is also a diplomatic breakthrough for Japan itself, because never before has that country signed agreements of that kind," the expert emphasized.

And now Japan has committed support for Ukraine.

In that context, Mr. eshchuk also mentioned the expansion of sanctions against the Russian Federation and the use of frozen Russian central bank assets for aid to Ukraine.

"In Russia, there will no longer be a thing such as conversion between the ruble and the euro, between the ruble and the [US] dlar. Conversions between the ruble and any of hard currencies will now be impossible other than through the renminbi. There are very long queues at money changers as the Russians are in rush to exchange their "wooden" rubles for dlars. Regarding the use of the frozen Russian assets, our partners were able to find a ‘Somon’s sution’ to this," the expert says.

This issue had been under debate for a long time, because G7 countries are those governed by the rule of law, and so they just could not seize someone's money without flowing prer legal procedures.

"Because they knew that once such a decision is made, the Russians will go to court the next day, and the decision will be reversed. So they have made a Somon’s decision. They agreed on a loan for Ukraine. And then this loan will be incrementally repaid from the interest earned on immobilized Russian sovereign assets. Therefore there will be no confiscation technically. Ukraine receives money, and the Russians have nothing to sue about. And if tomorrow, for example, there will be a court decision to compensate Ukraine for war losses using the frozen Russian assets, then the money can be confiscated immediately, that is, we will continue to claim the $300 billion worth the Russian assets that remain immobilized”, Petro eschuk further explained.

Come what may, Ukraine has got guaranteed financial support for the next year: "Whatever happens in the world, in Eure or the United States, whatever pitical disturbances happen out there, Ukraine will have $50 billion in guaranteed financial assistance for the year to come."

On the sidelines of the G7 Summit, President Vodymyr Zelensky met and talked with the Prime Minister Giorgia Meloni of Italy

Pitical analyst eh Posternak believes that the G7 Summit was supposed to prove that the theme of Ukraine will remain high on the Allies’ agenda for as long as Russia’s unprovoked invasion of Ukraine drags on. And it did prove it.

"Western leaders felt the need to show for the "axis of autocracies" to see their unweaving support for Ukraine, despite the inconsistent dynamics of the Russo-Ukrainian war, the delay in the provision of military aid, a certain public fatigue in the West with the war, etc. "War of attrition" dictates its logic. This is what underlaid the decision to provide $50 billion in loan to Ukraine to be repaid from interest earned on frozen Russian sovereign assets," Mr. Posternak explained.

UKRAINE-U.S. SECURITY AGREEMENT: WHAT’S ON THE AGREEMENT

Here are the key provisions of the bilateral security agreement, which consists of a preamble, 11 articles and an annex prescribing how the Agreement’s articles should be implemented (for full text visit https://www.ukrinform.net/rubric-pytics/3875245-zelensky-biden-sign-10year-bilateral-security-agreement.html).

Vodymyr Zelensky and Joe Biden signed a bilateral security agreement aimed at strengthening Ukraine's ability to defend itself in the present while also deterring aggression anytime in the future

Here is what’s on the agreement signed

The United States recognizes that in order to make sure Ukraine’s security is guaranteed, it needs significant military support, a strong potential and a sustained investment in its defense and industrial base develment in line with NATO standards. 

• military support

The US declares its intention to provide long-term financial, training and advisory support.

The United States intends to 1) pursue further steps to transition to a modern air defense architecture for Ukraine over time, with associated radars, interceptors, and support equipment across the spectrum of tactical- to strategic-level capabilities; 2) continue with the purchase of ammunition, promoting prer intelligence sharing and bstering bilateral coeration between the intelligence services.

Furthermore, the U.S. commits to coordinate with Ukraine on the modernization of Ukraine’s Air Force, including working toward procurement of squadrons of modern fighter aircraft, sustainment, armament, and associated training to support fourth generation fighter capability (including, but not limited to, F-16 multi-re aircraft), as well as other air domain capabilities such as transport and intelligence, surveillance, and reconnaissance platforms (including unmanned).

The United States commits to support the improvement of Ukraine’s capacity to defend its territorial waters and promote Black Sea regional security through capabilities that could include coastal defense systems; maritime domain awareness; unmanned systems; and surface vessels, including patr and riverine craft, naval firepower, maritime mine countermeasures, and other weapons that will help strengthen maritime security in the Black and Azov Seas and help Ukraine exercise sovereignty over its territorial seas and sovereign rights and jurisdiction in its exclusive economic zone.

The United States commits to support Ukraine’s capacity to increase the cybersecurity and protection of its critical infrastructure and government information resources, including by strengthening its cyber defenses against malicious cyber activities by Russia and other hostile state and non-state actors. 

The United States commits to support Ukraine’s capacity to sustain and independently support its forces over the long term, maximizing its erational freedom of action.  Such efforts could include support to logistics, personnel services, and health service support.

The United States intends to assist Ukraine to improve the cyber resilience of its critical infrastructure, especially energy facilities, against aerial strikes, and to support the quick restoration of destroyed infrastructure, including by providing material and technical assistance.

The United States intends to pursue a long-term training program for the Ukrainian Armed Forces and other security and defense forces.

Both sides recognize the importance of a coordinated and robust demining program to Ukraine’s long-term recovery potential, due to the contamination of Ukraine’s territory with explosive ordnance as a result of Russia’s war.

• NATO membership

The USA reaffirms that Ukraine’s future is in the North Atlantic Treaty Organization (NATO) and reiterates its support for the declaration of Allies at the 2023 Vilnius Summit that Allies will be in a position to extend an invitation to Ukraine to join the Alliance when Allies agree and conditions are met emphasizing the importance of its deepening integration into the Euro-Atlantic community.

The Parties recognize this Agreement as supporting a bridge to Ukraine’s eventual membership in the NATO Alliance. In the event that Ukraine becomes a member of NATO, the Parties shall meet and confer on the future status of this Agreement.

• economic support

Both sides recognize that the recovery of Ukraine’s economy and industry would support Ukraine’s ability to shoulder more of the material and financial burdens of its defense over time.  The United States commits to work with allies and partners to support Ukraine’s economic recovery and bster Ukraine’s defense industrial base. Ukraine commits to develing and reforming its defense industry to support and sustain the needs of its security and defense forces.

The Parties intend to coerate to strengthen Ukraine’s economic stability and resilience.

• energy

The USA will support Ukraine’s energy security and its vision of a modern, cleaner, more decentralized energy system that is integrated with Eure.

In addition, the US will identify strategic investment portunities that mutually benefit the Parties, and encourage the develment of projects, including those that can attract private and public investment in Ukraine, that support Ukrainian and American economic develment and partnership, such as in the areas of defense production and infrastructure.

• reforms

Ukraine undertakes to implement reforms to its democratic, economic, defense, and security institutions in line with its EU accession goals, NATO adapted Annual National Program priorities, and obligations and commitments under agreements and arrangements with the International Monetary Fund. In particular, Ukraine commits undertaking efforts towards strengthening its justice sector reform to promote the independence and integrity of the judiciary.

What else is important about the Agreement:

• it will remain in force 10 years from entry into force and may be extended by mutual written agreement of the Parties.

• either Party may terminate this Agreement by providing a written notification through diplomatic channels to the other Party of its intent to terminate this Agreement.  The termination shall take effect 6 months after the date of such notification.

ZELENSKY HAS REQUESTED 7 MORE PATRIOT AIR DEFENSE SYSTEMS

At a joint press conference with Biden flowing the signing ceremony, Vodymyr Zelenskyy said he “urgently” needed seven Patriot systems. Biden replied, “You’ll have some relatively quickly,” and that other countries expecting air defense systems from the USA “will have to wait”.

U.S. President Joe Biden

Biden said the US has commitments from five countries that he did not name to provide Patriot missile and other air defense systems to Ukraine. He said countries that have been expecting the same weapons from the US have been td they will have to wait because “everything we have is going to go to Ukraine until their needs are met.”

The US president also announced three actions his country is undertaking together with other G7 countries to support Ukraine:

• signing bilateral security agreements with the USA, Japan and other G7 industrialized democracies;

• "historic agreement" to lend Ukraine $50 billion in a loan to be financed by windfall proceeds from sanctioned Russian assets;

• an agreement to bster sanctions to prevent third countries from providing military aid to Russia and to intensify pressure on the Russian economy.

"Combined together, this is a powerful set of actions that will create a robust foundation for Ukrainian success. Biden said the series of actions to support Ukraine show Putin that “he cannot wait us out. He cannot divide us. Together, we show Putin that he cannot wait us out, that he cannot divide us. And we will be with Ukraine until they prevail in this war".

Let's emphasize: it is the first time Biden was talking about Ukraine winning the war against Russia as a goal.

EXPERTS: THIS AGREEMENT IS THE FIRST RECORD OF WHAT CAN BE CONSIDERED ALLIED RELATIONS BETWEEN UKRAINE AND THE USA

Some Ukrainian pitical analysts are viewing the agreement with the USA as history-making. Vodymyr Fesenko: "This is a truly historic develment. This is the first such agreement to have been signed with the USA in modern Ukrainian history. Generations of Ukrainian diplomats had dreamed of a security agreement with the United States."

This agreement, like similar agreements Ukraine has signed with other countries, is a meaningful, binding commitment that has been formalized, pitically and legally, and publicly confirmed, says the pitical analyst.

"We are talking about specific forms of assistance to be provided to Ukraine during the next 10 years: the provision of weaponry (particularly fighter jets and Patriot air defense systems), facilitating defense industry develment, economic assistance to our country (included in individual agreements, with specified amounts of annual assistance), promoting reforms in Ukraine, security coeration in various domains”, Mr. Fesenko explained.

In addition, he notes further, these agreements prescribe a mechanism for coordinating actions and responses in the event of a new Russian aggression. In several such agreements, in particular, with the USA, there is a provision on supporting Ukraine's NATO membership aspirations.

Mr Fesenko views: "It is fundamentally important for us that the US and other international partners publicly take pitical and legal commitments to continue into the next 10 years the assistance already being provided, regardless of when the war against Russia ultimately comes to an end. So a coalition of partners is being formed around Ukraine, which will contribute to our resilience and resistance to the ongoing Russian invasion, and in the long run may be a factor in deterring Russia from a new attack on Ukraine."

This is the first such agreement Ukraine has signed with the USA since independence

Mr. Fesenko also drew attention to Joe Biden's words that the White House is preparing a “victory plan” for Ukraine flowing the signing of the security agreement with Kyiv. Biden said that the White House is actively working with the Ukrainian side on develing this plan, which includes providing additional military assistance to Ukraine. He stated that the basic contours of this plan are already in place, but the details are still being worked out. Biden also emphasized the importance of the recently signed security agreement between the U.S. and Ukraine, as well as of the sanctions and measures regarding the use of Russian assets to support Ukraine’s victory. He noted that Ukraine has the capabilities for effective defense if provided with the necessary weaponry, which is currently being provided by the USA.

Fesenko: "But I would avoid unnecessary pathos. This agreement alone will not bring victory to Ukraine. The White House must first clarify what they mean by the term “the victory of Ukraine”, then formulate the necessary conditions for such a victory and provide the necessary means to achieve it. But this agreement is significant in that it lays a long-term regulatory and pitical foundation on which we can rely in our struggle for victory over the Russian aggressor."

Well, we cannot but agree with the expert. Ukrinform has recently published an article on the U.S. foreign and security picies, which is closely related to the name of Jake Sullivan, the national security adviser to the US president, to his vision of the global world, particularly in the context of the need for a US-Russia  partnership for countering China (this article is available via https://www.ukrinform.net/rubric-pytics/3868558-us-ban-on-ukraines-use-of-its-donated-weapons-against-targets-inside-russia-does-such-a-ban-exist-actually.html).

"The security agreement between the United States and Ukraine is undeniably important for the American-Ukrainian strategic partnership, it is the legal materialization of a new level of relations within the security system and of a sustained military assistance," eg Posternak believes.

The expert says that this agreement is far from containing clauses on mutual defense or being a defense pact.

"But this agreement is a significant and enormously needed intermediate phase of a sustained security coeration on Ukraine's path to NATO membership," the expert emphasized.

Petro eshchuk, for his part, reminds that this agreement is a flow-up to what was laid down in the agreements Ukraine had signed with the United Kingdom, France, Germany and other states previously. But it is the agreement with the USA that is worked out best in terms of vume and details.

"In fact, this is the first record of what can be considered allied relations between Ukraine and the USA. Previously, the term "ally" was only used metaphorically nor was it formalized into official documents".

The pitical analyst does not rule out that there will be those who will wish to compare this with the infamous Budapest Memorandum, but here it is simply worth reading one document, then the other. There is a gap between them.

"There is also a gap in terms of the approaches employed by Ukrainian diplomats. Why was Ukraine unable to secure similar deals earlier? It couldn't, didn't want to, didn't find support from the USA? That, I think, is a very interesting question," Mr. eshchuk added.

"Needless to say, everyone will now begin clinging to the wording about "consultations", but this is the standard language of diplomacy. If you read Article 5 of the North Atlantic Treaty, it also talks about consultations. We must realize that no one will fight a war for us, and similarly, no one will fight a war for the United States, Israel or Taiwan, by the way. But if we are to reach that high level of coeration, it would be a good guarantee for the future. That said, the agreement is not an "empty" document. It contains a lot of important provisions. One such is about supporting Ukraine's NATO membership, for example, and that support will last 10 years, both during and after the war."

There are also provisions on bstering Ukrainian air defense capabilities (particularly the F-16 jet fighter capability, meaning other fighter capabilities will flow).

"The agreement also addresses support for Ukrainian land forces develment and coeration in the production of weapons among lots of other important provisions," Petro eshchuk reminds.

RISKS: WHAT IF TRUMP WON THE PRESIDENCY IN 2024?

There are fears that, if Donald Trump returns to the White House, the security agreement with Ukraine can be cancelled due to the confusion and unpredictability of his nature, his tendency to make U-turns in 24 hours. Here is what our experts think about it.

Donald Trump

Even though the agreement was signed for 10 years, it does not contain a guarantee of its extension in the event of a new President is elected. This is one thing. Second, Trump is really inclined to revise the U.S. commitments, as was the case, for example, with the Iran nuclear agreement or the US withdrawal from the climate agreement, etc. So the risk is there.  It can only be neutralized by building a personal, trustful and pragmatic relationship with Trump," says eh Posternak.

Petro eshchuk comments further: I would like to look at an American president who will do it within the U.S.  picy paradigm and will stand up to fierce criticism and attacks from ponents."

The expert reminds that the USA is not a dictatorship, but a compound democracy invving many actors who interact simultaneously.

"I therefore believe that the favored narrative by anti-Ukrainian forces in the USA – that the States have no obligations to Ukraine, hasn’t promised anything, do not have to do anything — has been eventually busted. And from now on, the Agreement can be relied on during all talks with members of the U.S. Congress and Government. This is a fact that cannot be rejected, ignored, or pretended that it doesn’t exist. This is just a starting point that will hefully lead to something else. But for a start, it would be good to implement what has already been agreed upon. That’s to say, we have something to rely on, something to refer to. Everything else is a matter of efforts and actions by specific pele."

Vodymyr Fesenko comments: "Indeed, this is not an international agreement that requires Parliament’s ratification. Diplomatic sources are saying that it was a US precondition that reflected the current domestic pitical complexities in the USA. And the White House did not want to risk it. At the same time, this is not a "memorandum" (that is, a "memory note") with theoretical commitments. It is rather a pitical and legal document that meaningfully enshrines specific forms of assistance to Ukraine. This is our partners’ public pitical and legal commitment to us."

Yes, indeed, the next US leader can legally cancel this agreement: "Trump, when he had been elected as president, canceled a number of agreements signed by his predecessor. But he promised to cancel specific agreements while campaigning for 2016 presidency. Such actions by Trump, however, had significantly undermined the international reputation of the United States. But in the USA and in Western countries, there is an interparty consensus regarding support for Ukraine. And therefore, although the potential risk of these agreements being cancelled exists in theory, in practice it currently seems unlikely."

After all, it should be remembered that even bilateral agreements ratified by parliaments can be canceled (or suspended). It's just that the procedure for canceling them is a bit more complicated and lengthy. And there are lots of examples of this. There are also examples where even agreements on mutual (clective) military assistance were not implemented in actuality. There are no absute guarantees anywhere, including in international law.

"Finally, it is necessary to understand that democracies and their leaders, if they sign such meaningful agreements, publicly undertake the corresponding pitical and legal commitments, meaning this corresponds to best interests of their respective states. It is not by chance that the USA has just now agreed to take such a step. Previously, they categorically refused to take on any specific security obligations regarding Ukraine," Vodymyr Fesenko summarized.

Myroslav Liskovych. Kyiv