Via Teleconference
MODERATOR: Okay, thanks everyone. I think we’re all set. I’ll turn it over to our senior administration official in a second, but just sharing that we will now have an embargo on this call to about 3:30 p.m. Central. We’ll send another note letting everyone know whenever it lifts.
But for your awareness, not for your reporting, the senior administration official on today’s background call is [senior administration official]. He’ll give a few words here at the top about the Russian sovereign assets, and then we’ll have time to take one or two questions.
Thanks, everyone.
SENIOR ADMINISTRATION OFFICIAL: Yeah, thanks, everybody, for joining. I’ll say a few words at the top on the sovereign assets, the (inaudible) deal, and then happy to take any questions that you have.
(Inaudible) — (in progress) — every G7 member that the situation on the battlefield remains difficult and that if the war continues, Ukraine is still going to have a large financial need next year and beyond, and that this summit is our best chance to act collectively to close the gap. And it’s only fair that we close the gap by making Russia pay, not our taxpayers. And we found a way to do so that respects the rule of law in every jurisdiction; it raises money at scale — $50 billion, to be precise, this year. We’re going to move with urgency. And we’re going to maintain solidarity, which has been our greatest strength.
But I would say, more fundamentally — and President Zelenskyy will probably speak to this in a couple of minutes here — this agreement is a signal from the leading democracies of the world that we’re not going to fatigue in defending Ukraine’s freedom and that Putin is not going to outlast us.
Let me just stop there. I know you have questions, so please jump in.
Q Hey, it’s Andrea here from Reuters. Can you tell us what — you said two things. You said, “We have a deal” and “We’re on the cusp of a deal.” So is it decided? And also, can you say what the amount will be? Was there agreement on the $50 billion? And will you — you know, or is that still something that needs to be worked out?
SENIOR ADMINISTRATION OFFICIAL: Yeah. Fair enough, Andrea. I think the leaders’ communiqué has not yet been released. That’s why I hedge my words very slightly. We have political agreement at the highest levels for this deal to happen. And it is $50 billion this year that will be committed to Ukraine.
Q Great. Can I ask a follow-up question? So can you walk us through some of the mechanics as they exist now? Who will loan the money and how will it be backed up?
SENIOR ADMINISTRATION OFFICIAL: Let me try to hit — I mean, I think I probably can guess some of your questions. And they’re totally — they’re the right questions.
Okay, like, how did this get done? I mean, honestly, the hard part is not so much the idea. There are infinite ways to extract the present value of future cash flows. That’s finance 101. (Inaudible) diplomacy — the sausage making of diplomacy is hard enough domestically. It’s an order of magnitude more difficult multilaterally. But the President and Jake Sullivan really had leadership, and we executed across borders.
In terms of who makes the loan, we’ve said the U.S. is willing to make a loan of up to $50 billion. We will not be the only lenders. This will be a loan syndicate. We’re going to share the risk because we have a shared commitment to get this done.
How will — I’ll just ask myself some questions. Are we going to get repaid? Russia pays. So the interest — the income comes from the interest stream on the immobilized assets. And that’s the only fair way to be repaid. The principal is untouched for now, but we have full optionality to seize the principal later if the political will is there. You’ll see a line in the communiqué that makes it clear that option is still on the table.
How will we know the assets are going to remain immobilized? I mean, my answer to that is: Because leaders have committed to do so. And they’ve also committed to seek approval from the full membership of the EU to get another blessing. And I would say when you have a commitment at the highest political levels, technocrats act and technical details get worked out.
Let’s see. What if there’s a peace settlement and the assets are no longer immobilized? Well, look, a just and sustained peace is, of course, what we all want. And G7 leaders have committed that the assets will remain immobilized until Russia pays for the damages it’s caused. So if there is a peace settlement, either the assets stay immobilized and keep generating interest to repay the loans, or Russia pays for the damage it’s caused. Either way, there’s a source of repayment.
And let me stop talking to myself and listen to you, if you have more questions.
Q I do. Can you explain, you know, how did you move past the resistance that was reported there from France, Germany, and some of the others?
SENIOR ADMINISTRATION OFFICIAL: Leadership and stamina. You know, we had backing at the very top of our political system. President Biden and Jake Sullivan in particular deserve credit. And we just worked this for years. I mean, if you go — if you want to go through the tick-tock of this, it goes back pretty close to the beginning of when we immobilized these assets in the first place, two years ago.
And, I mean, I would say — what I said at the top is what was clear to every leader — what is clear to every leader in the room that signed up to this communiqué, which is: The situation on the battlefield is still very difficult. That means there’s going to be a large financial need, even after our supplemental and even after the EU 50-billion-euro facility. And that, you know, it’s very simple: Russia should pay the loan. And this is our — this is our best chance as a G7 to act together.
And we found a way. I mean, we did have to be creative. We floated I don’t know how many ideas. But ultimately, we found an idea that respected every jurisdiction’s red line; it respected every jurisdiction’s rule of law. And it still raised money at scale, at speed, and with solidarity. And that’s what we have announced today.
AIDE: Andrea, I think we’ve got a lot more people with questions, so we’re going to pass it back.
MODERATOR: Thanks. Our next question will go to Josh from Bloomberg.
Q Hey there. Thanks for doing this. Can you just zero in on the question of the mechanics? How many individual loans are we talking about? And is it accurate that it’s not clear how much the U.S. contribution will be and that the U.S. (inaudible) bring about $50 billion, or whatever the sum of the other contributions is?
SENIOR ADMINISTRATION OFFICIAL: Yeah, hi, Josh. I’m not going to speak for other delegations. I mean, they really — it’s for them to say if they’re going to contribute to the loan. But what you’ll see in the communiqué, just to give you a preview, is that there will be loans, plural. So I can assure you the United States will not be the only lender in this syndicate.
As I mentioned at the top, we, the U.S., are willing to provide up to $50 billion of the loan. And that’s why we know the number will be at least — will be $50 billion. Whether other delegations make commitments in public today, I’m not sure. But as they do so, you’ll see that our number is probably — is certainly going to be somewhat less than 50 and maybe significantly less, because the idea here is to share risk. And I think getting the $50 billion is really important, but equally important is having a shared commitment. And the loan syndicate is kind of a technocratic expression of that commitment that’s being shared.
Q Any thought that (inaudible) more on this will allow you to do it through (inaudible) congressional approval?
SENIOR ADMINISTRATION OFFICIAL: I’m sorry, Josh, that cut out a bit. I think you’re asking about, like, can we have — what kind of scoring situation will this —
Q Yeah.
SENIOR ADMINISTRATION OFFICIAL: You can think of this as a secured loan. It’s secured with the interest that’s generated from the immobilization of the assets. And so, because there’s now a commitment to keep the assets immobilized, that means there’s a commitment to keep the income stream flowing. There are scenarios in which that income stream may not flow. But even in those circumstances, there would be a reparation payment, and that can also be a source of repayment.
So we’re covered. We feel like this is a very prudent structure that allows us to manage risk with other partners in a way that’s going to be, I think, successful for Ukraine and gives the signal that we’re all — you know, we’re all giving Ukraine a psychological boost. We’re giving it an inflection point in this conflict by demonstrating that we’re not going to fatigue no matter what happens in elections anywhere across the world.
MODERATOR: Thank you. Our next question will go to Selina with ABC.
Q Hi. Thanks so much for doing this. I just have a couple of questions. Just number one, could you just kind of do a little bit more detail about concerns that some of the European countries had and just how you convinced them to sign on to this?
And secondly, is the primary purpose of these funds to be used for rebuilding the economy? For defense? All the above?
SENIOR ADMINISTRATION OFFICIAL: So, I mean, I think the most convincing argument to every other delegation is: While there may be costs and risks to providing this loan, all policy decisions need to be weighed against the counterfactual. What’s the alternative? And if Ukraine was insufficiently financed to win this war, what would be the chilling effect it would cause across Europe and the rest of the world? What would be the signal to autocrats that they can redraw borders by force? Those are the costs I think we all agree were unacceptable. And that’s why we acted.
Q Sorry, what about the second question in terms of the primary use of the funds for rebuilding the economy?
SENIOR ADMINISTRATION OFFICIAL: I’m sorry, I didn’t hear that. Sure.
So that’s kind of a — I don’t mean to be glib. There’ll be multiple distribution channels for the money with multiple destinations, by which I mean military support, budget support, humanitarian support, reconstruction support. These will all be destinations for the funds that we generate.
And, you know, here we’ve created flexibility in this structure. There are certain jurisdictions that prefer to send their money to budget support and to reconstruction. There are others that prefer to have their money earmarked, especially now, to military support. And both — all of those distribution channels are reinforcing money is fungible.
MODERATOR: Thank you. Our next question will go to David Sanger with the New York Times.
AIDE: David, are you on? Okay, seems like we should move on.
Q Hi, it’s Colleen from the AP. I’m wondering if we could talk a little bit about when Ukraine can expect to start seeing the funds.
SENIOR ADMINISTRATION OFFICIAL: Yeah. So you’ll see in the communiqué that the disbursals will begin this year. I can’t give you a specific date because there are some next steps that need to be taken. For example, the EU-27 needs to enshrine this action. We need to write contracts between the lender; the recipient, of course Ukraine; and intermediaries. So I mentioned distribution channels; those are the intermediaries, and there will be multiple intermediaries.
And then we have to work out the disbursal schedule. And the disbursal schedule needs to be at a pace that Ukraine can effectively absorb and direct to its highest priorities. So that’s going to take some time.
But as I mentioned, this is not an initiative that is indefinitely (inaudible) —
Q Can you repeat that last thing?
Q Sorry. We’re having a hard time hearing you. Sorry.
AIDE: Is the Internet cutting out?
Q We hear you now. The Internet was cutting out.
AIDE: Okay, I’m going to pass the phone back, and we’ll try this again.
SENIOR ADMINISTRATION OFFICIAL: Should I repeat the answer to the last question?
Q Yeah. So I heard you up until you said there’s a disbursal schedule and that’s going to take some time. And then we started to lose you after that.
SENIOR ADMINISTRATION OFFICIAL: Oh, I see. Okay.
So I was describing the next steps. The next steps are to enshrine the communiqué commitments with the EU-27, the full membership. Then we need to write contracts between the lenders — and I emphasize plural; the recipient, which is Ukraine; and the intermediaries, and there’ll be multiple intermediaries. And then we have to agree on a disbursal schedule because we need to ensure that the disbursals can be effectively absorbed by Ukraine and that they can be directed to their highest priority uses.
But again, I don’t mean to make it sound as though this is going to take years. The commitment is to be ready to disburse $50 billion this calendar year.
Q Can you just clarify that please? Is it all 50 this calendar year, or is it just the portion that the U.S. is able to disburse? Because I understand that we have legal authority to disburse some of the money but not all. Can you also explain in terms of, you know, what is that authority? Where does that come from? Is it related to the REPO Act? I guess I still am not clear in terms of the disbursement and the legal requirements around it, and the guarantee.
SENIOR ADMINISTRATION OFFICIAL: Yeah, so — sure. Sure.
So we have we have loan authority already. USAID has loan authority already established from Congress. There’s not a set schedule that is required or a capped amount. But we have decided that we can provide up to $50 billion.
I didn’t answer your question precisely on when the last payment will be made because it depends — it does depend on how — the pace at which Ukraine can absorb the money effectively.
So while we’re availa- — while we have $50 billion that we could make available this year, that depends on our judgment as to how effectively Ukraine can absorb it. And every jurisdiction that’s making a loan has to go through the same process.
So the money will be available. There’s no constraint on that basis. We will begin disbursing this year, but I can’t say that the endpoint of the disbursals will be in 2024. Is that clear?
Q Yes. And can you address just in terms of guaranteeing that these loans will be immobilized? Because as I understand, the EU needs to renew sanctions regime every six months to keep these assets immobilized. So how have leaders agreed on that issue?
SENIOR ADMINISTRATION OFFICIAL: Well, you’re right about the mechanics. But we have confidence because European leaders — Germany, France, Italy, the European Commission, President of the European Council — they’ve committed to do so and to seek approval from the full membership of the EU to get that blessing. And when you have commitment at the highest political levels, you know, that is what gives us confidence that these assets are going to remain immobilized, the income will continue to flow, and we will be repaid either from the income itself or through reparations with Russia.
MODERATOR: That’s all the time we have. Thanks, everyone. And again, this is embargoed until 3:30 p.m. This was on background to a senior administration official. Thanks again.
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