The G7’s final agreement to approve a $50 billion loan backed by Russian assets to support Ukraine’s war effort has the potential to upend the Western financial system. Critics say the United States and other countries could face consequences, including losing the trust of some allies.

Russian asset-backed loans have the potential to upend the current Western financial system

Recently, the G7 countries agreed to a $50 billion loan, which will be repaid through procedures known as the immobilization of Russian assets, potentially affecting the current situation of the Western financial system. The agreement was finalized on October 25, establishing that these disbursements will include support for "budget aid, military assistance, and reconstruction of Ukraine."

The United States will provide $20 billion as part of this package, with President Biden stating that, ultimately, "Ukraine can receive the necessary support right now, without burdening taxpayers." However, this action and its legality have led experts to ponder the potential consequences of using Russian asset procedures for war efforts.

Sergio Rossi, a professor of macroeconomics and monetary economics at the University of Fribourg, commented on this hypothetical development in February, saying that he believes this is not legally feasible in Western countries.

Additionally, Rossi stated that this could impact the reputation of these countries in holding capital from other nations. In this regard, he emphasized that these measures could "pose some risks to reputation at the international level, as these countries may be seen as less reliable in managing foreign financial capital, thus potentially being seized in the not-so-distant future."

Deputy Finance Minister Ivan Chebeskov also considered this issue, emphasizing that it would have profound consequences for the international financial system and the future of the US dollar as a world currency.

Read more: Russia warns of global market shock if frozen assets are exploited, escalating sanctions threats.

Although this is a slower move compared to directly using seized assets for war purposes, President Putin has regarded these actions as "theft" and "fraud," pointing out that such behavior will be punished.
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