The US has urged its G7 allies to issue a $50bn bond backed by the profits earned from the $300bn of frozen Central Bank of Russia (CBR) money held in Europe.

The creation of a special purpose company that would issue bonds worth at least $50bn is the latest scheme on how to tap the money frozen at the start of the war.

Separately, EU leaders have agreed in principle to seize the profits earned by the frozen assets as an EU summit kicks off in Brussels on March 22.

The assets could generate €3bn this year and the first billion could be released to Ukraine by July, the European Commission president, Ursula von der Leyen, said in opening remarks at the end of the first day of an EU leaders’ summit.

“I told the leaders that if we are swift now in concluding the proposal, we could disburse the first billion on the first of July. So it depends on us,” she said, adding there was strong support to use the proceeds on “military purposes for Ukraine.”

The Kremlin said seizing the profits of the frozen money would be a “flagrant breach” of international law and has threatened to take extensive legal action. But EU diplomats said they were all agreed the profits or interest generated by the frozen assets could be used in Ukraine.

The EU is also expected to hike tariffs on the import of Russian grain to Europe during the summit as part of the ongoing debate on better controlling the import of both Russia and Ukrainian grain to the EU.

The West has been moving towards seizing the CBR money since the start of this year, but while Washington has already passed laws that would allow it to outright seize the approximately $5bn of Russian CBR money in the US, Europe has remained very reluctant to do the same to the approximately $280bn it holds.

Rather than seize the principal capital, Europe has focused more on using the profits the assets earn and has recently said it is open to taxing these profits and using the money to help Ukraine. The frozen assets are expected to earn some €3.6bn of profits this year.

The US suggestion to issue a $50bn bond would create almost as much as the US proposed $60bn allocation that is currently bogged down in Congress.

The plan involves consolidating the CBR’s $280bn of assets into a special vehicle. The revenue from these assets would finance the issuance of so-called "freedom bonds.”

While discussions are still at a preliminary stage, certain G7 members, including Germany and France, have already reportedly expressed reservations about the initiative. In contrast, some EU member states like Estonia are advocating for a more aggressive stance, suggesting outright seizure of the Russian assets.

Some Western banks have also resisted reallocating the interest earnings from the frozen Russian assets, anticipating costly legal challenges to the move.

Austrian Chancellor Karl Nehammer expressed opposition to utilising the revenue from Russian assets for arming Ukraine, while German Chancellor Olaf Scholz and Belgian Prime Minister Alexander De Croo showed support for the idea of directing income from Russian assets towards Ukraine's military needs.

The EU also completed this week the first transfer of €5bn to the Ukraine assistance fund that is part of the four-year €50bn support package agreed in December.

Republican House Speaker Mike Johnson promised to review US aid to Ukraine as soon as possible, but only after April 8. The main priority of the US Congress is the approval of the government's budget for 2024, and since this issue is almost resolved, the aid package for Ukraine will be discussed “very soon,” said the speaker on March 22.

Congress must approve the budget by March 22. However, after March 22, the House of Representatives begins a two-week break, so lawmakers will most likely move on to a bill to finance aid to Ukraine, Israel, and other US partners after April 8.

“US lawmakers are debating the entire package of additional financing for partners," Johnson clarified.

He reminded observers that a bill is currently being actively discussed that would allow the use of confiscated assets belonging to Russian oligarchs to aid Ukraine. In addition, the concept of loan assistance is also being discussed.