Britain is to lead a ‘bullion for bullets’ scheme to use Russian financial assets to pay for Ukrainian weapons.
As part of an international initiative, the UK will lend Ukraine £2.26 billion ($3 billion) then recoup the money from the interest earned on Kremlin investments in Europe.
These assets, frozen after Russia’s illegal invasion of Ukraine, cannot be sold for legal reasons.
But the interest generated by these state funds, which should run into tens of billions of pounds in the coming years, can be put to good use.
The interest will cover Ukraine’s repayments on the loan meaning UK taxpayers will not be out of pocket.
Chancellor Rachel Reeves has announced a ‘bullion for bullets’ scheme to buy Ukrainian weapons with Russian assets
Artillery shells being produced in Britain. The new loan to Ukraine will be paid back using the profits of frozen Russian assets
Britain will also continue to gift the country £3 billion in military aid on an annual basis as the revenue streams will remain entirely separate.
In total, Ukraine will receive $50 billion in loans from the UK, the European Union and G7 countries such as the United States.
Last night, writing exclusively for the Mail, Chancellor Rachel Reeves explained the ‘sting in the tail’ of the loan was how it will be paid back.
The Chancellor said: ‘The loan will be paid back using profits made from sanctioned Russian sovereign assets held in the European Union.
‘It’s a groundbreaking scheme that we have been working on with our G7 partners.
‘Right from the start we have been tough in applying sanctions. That’s slowed Russia down. Without them, Russia would have over $400 billion more – enough to fund this illegal war for a further four years.
‘And now we are taking the consequences further. Using profits from their own assets against them.’
UK-based military manufacturers will also benefit as Ukraine is likely to purchase some weapons which include British components.
The details of the G7 Extraordinary Revenue Acceleration (ERA) scheme were thrashed out by international finance ministers in recent weeks. Officials hope that once the conflict concludes interest from the same assets will pay for reconstruction in Ukraine.
Ukrainian servicemen fire a howitzer toward Russian positions near the front line in Chasiv Yar, Donetsk
Last night’s announcement by the Chancellor and Defence Secretary John Healey came after they visited Ukrainian troops training in the UK at the weekend.
More than 45,000 Ukrainian personnel have been trained in this country under Operation INTERFLEX and the scheme has been extended to at least the end of 2025.
The UK’s £2.26 billion loan is earmarked as budgetary support for Ukraine’s military spending, enabling the Ukrainians to invest in key equipment to support their efforts against Russia, such as air defence, artillery and wider equipment support.
It comes on top of the UK’s existing £3 billion a year military aid for Ukraine, which the Prime Minister re-committed to within his first week in office.
The UK has sent around 400 different capabilities to Ukraine, with Defence Secretary John Healey MP recently announcing that the UK will supply 650 Lightweight Multirole Missile systems to Ukraine to boost the country’s air defences.
