After months of wrangling, the US finally released a $20bn loan to Ukraine on December 10, funded by profits from Russia’s frozen $300bn reserve assets, as part of a broader G7 $50bn loan to Ukraine, approved on June 13 at a G7 summit in Italy.

The EU has already approved the loan and was prepared to separately release €35bn to Ukraine by the end of this year while negotiations continued. The US was unhappy with an EU requirement to review the deal every six months, and was holding out for a longer period.

The loan payments are to be entirely funded by profits earned from the Central Bank of Russia (CBR) frozen assets held in Europe that generate around $3bn a year.

“These funds – paid for by the windfall proceeds earned from Russia's own immobilised assets – will provide Ukraine a critical infusion of support as it defends its country against an unprovoked war of aggression,” US Treasury Secretary Janet Yellen said while announcing the decision.

The $50bn in new loans will largely go to pay for essential civil services and cover the government’s budget deficit. Ukraine’s Ministry of Finance (MinFin) said earlier that it intends to keep part of the money as a reserve as it is expecting international funding to drop off significantly in 2026.

“The G7’s loans will help ensure Ukraine has the resources it needs to sustain emergency services, hospitals and other foundations of its brave resistance,” Yellen added.

Ukrainian President Volodymyr Zelenskiy expressed gratitude for the financial support, describing it as a significant gesture of solidarity. “I am deeply grateful for the disbursement, calling it ‘a powerful act of justice,’” Zelenskiy said.

“The support will strengthen Ukraine's defence and help protect our sovereignty and people against unprovoked aggression,” he said in a post on social media.

The US decision comes at the eleventh hour before President-elect Donald Trump takes over in January; he is expected to cut funding to Ukraine.

At the start of this week the EU said it was ready to fill in for the US on December 10, if Washington failed to approve its share of the G7 loan agreement.

The US’ growing reluctance to continue to fund Ukraine was demonstrated last week when US Speaker of the House of Representatives Mike Johnson refused to include a proposal by the outgoing Biden administration to include a fresh $24bn in funding for Ukraine in a Congressional spending bill. Johnson said that he wanted to wait for Trump to take over to make a decision on new funding for Ukraine.

While the $50bn is a loan, Ukraine will not have to repay it until it receives reparations from the Russian Federation. Ukrainian parliament members approved amendments to the Budget Code last week, which introduced a new concept in the budgetary sphere – “conditional debt obligations.” This establishes a special status for funds that Ukraine will receive from frozen Russian assets.

"The 'non-refundable' loan of $50bn from the G7 countries and the EU is precisely such a conditional debt obligation because Ukraine will not repay this loan until it receives reparations from Russia," explained the head of the Rada budget committee, Roksolana Pidlasa, last week. She added that this money will not be considered Ukraine's state debt, which is expected to break 100% of GDP early next year.

The $50bn loan has since been split into three tranches. Ukraine will receive $22bn from frozen Russian assets in early 2025. (Previously the plan was to send the tranche before the end of this year.) The remaining funds will be received in 2026-2027, according to Finance Minister Sergei Marchenko.

However, if additional military needs arise, funding in 2025 may be significantly increased, the Finance Minister said.

The G7 loan comes on top of other significant commitments. In 2025, the Ukrainian government and the IMF expect to receive $13.7bn from the EU through the Ukraine Facility, $19.1bn under the ERA plan from the G7 and the EU, $3.1bn from the IBRD, $2.7bn from the IMF, and $1bn from the UK. Together, these contributions from external donors should provide Ukraine's budget with $41bn.

However, international donor commitments for 2026 barely reach $21bn. Starting from the second quarter of 2027, in the absence of new financial guarantees, Ukraine will face the problem of a colossal external financing deficit, experts say.