Britain is to lend Ukraine an additional £2.26bn and allow Kyiv to spend the money on weapons to fight off the Russian invasion as part of a wider $50bn (£38.5bn) loan programme expected to be confirmed by G7 members later this week.
The loans will be repaid using interest generated by the $300bn of frozen Russian assets held in the west, with the extra funds promised as the US heads towards a presidential election where support for Ukraine is a divisive issue.
Rachel Reeves said: “The profits being made on those assets aren’t being kept for Russia to use in the future. They’re now being used to fund Ukraine.” The chancellor made the announcement alongside the defence secretary, John Healey.
Britain has already committed to donating £3bn a year in military aid to Ukraine. The UK loan would be additional to that and likely to be spent by Kyiv on badly needed munitions, Healey said, once enabling legislation passed through parliament.
Efforts to hand the entire amount of Russian frozen assets to Ukraine foundered amid opposition from the IMF, concerned it would undermine confidence in the financial system, and fears it could be subject to legal challenges from Moscow.
“What we’re not doing is confiscating these assets to fund this loan,” Reeves said. “We’re using the extraordinary profits on the assets, and that’s how we’re confident that we can do this within all the right legal frameworks.”
The US is expected to contribute $20bn, with other G7 members confirming their share of commitments. Reeves emphasised the UK announcement was timed before this week’s IMF and World Bank annual meetings in Washington DC, a fortnight before the US presidential election. “We hope the other parts of the jigsaw fall into place at the end of this week,” the chancellor said.
Donald Trump, the Republican presidential candidate, has expressed scepticism about continuing future funding for Ukraine, raising questions about Ukraine’s ability to fight the war given the US has so far been Kyiv’s largest donor. Washington has provided $64bn in military aid since Russia launched its full-scale invasion in February 2022.
Some of the $50bn loans may be used to buy weapons made by the US, with diplomats seeing that as a possible alternative if Trump were to halt the flow of donations from US stockpiles. But it would be up to Ukraine to determine what it wanted to use the money for, in discussion with each G7 country providing a loan.
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Reeves declined to discuss whether next week’s budget, the first under this Labour government, would give a timetable as to when the UK would increase defence spending to 2.5% of GDP from 2.32% at present. “We stand by that commitment, and we’ll set out the details of that as soon as we can,” she said.
The chancellor is aiming to make £40bn worth of tax rises and spending cuts in the budget. Relations between the Treasury and Ministry of Defence remain cordial, with Healey not one of the ministers who have written to Reeves to complain about the level of cuts being sought by his department.