Lending against the profits, not the assets

Roughly three hundred billion dollars of russian sovereign assets were immobilised in 2022, most of it in Europe. That money sits somewhere and, sitting somewhere, it earns income.

Outright confiscation raises hard legal questions about sovereign immunity that lawyers in several jurisdictions were unwilling to answer quickly. So a different structure was built. The G7 agreed loans to Ukraine, disbursed now, serviced and repaid over years from the extraordinary profits the immobilised assets generate — not from the Ukrainian budget, and without touching the principal.

Why the design is clever

It converts a slow trickle of annual income into a large sum available immediately, which is what a country at war needs. It avoids the legal question that would have taken years. And it does not add to Ukraine's debt burden in the way ordinary borrowing does, because the servicing comes from elsewhere.

Whatever eventually happens to the principal — and that argument continues — the income has been put to work. As a financing structure, I find it genuinely elegant.