This is the $50 billion loan idea presented at the 2024 Bari G7 meeting.
The main purpose is to maintain the morale of the Ukrainian army and ensure they do not abandon the NATO ideal. This loan is in addition to the already promised $61 billion, morally obligating them to continue fighting for a cause that seems to be leading the Ukrainian nation to the brink of extinction, instead of reconsidering their NATO aspirations and opting for negotiations.
The second reason for this loan is to hammer another nail in the Russia-Europe relationship,as if there were not already so too many as Russia holds most of its $300 billion funds mainly in Europe: $190 million in Belgium, with France and Germany sharing the rest up to nearly $300 billion,apparently.
The plan is for the U.S. to issue the $50 billion loan with the EU as guarantor and the interest generated from Russian assets as collateral. If Ukraine fails to repay the loan, the EU will repay the $50 billion to the US, either from its own funds or by utilizing the interest generated from the Russian assets.
Since I am addressing an audience whose field of expertise is not finance and English is not their first language, I will take a moment to explain what collateral is.
When one applies for a mortgage, they apply for a loan, and the bank grants such a large loan because they know that if the person fails to repay it, the bank can repossess the house to cover its loss. In this case, the house is the collateral, a practical guarantee that if the loan is not repaid, something else of equal or greater value will replace the unpaid loan. This is similar to pawning.
It was not clear if this was an one-off $50 billion sum or there will be an attempt to generate such a loan every year for the next 10 years, but is clearly specified that the loan is issued exclusively for defense purposes only, not for reconstruction. The money will pay for military equipment and assistance, even if peace unexpectedly breaks out and reconstruction would be needed more than military assistance.
Expectations are for Ukraine to simply fail to pay back the loan and EU to access Russian assets interest generated funds to pay back to the U.S. as guarantor.