Global powers have a plan to use $250 billion in frozen Russian funds to help rebuild Ukraine

• G7 nations are considering a debt scheme that uses Russian reserves as collateral, the Financial Times reported.
• Russia would have to pay the debt. If not, its assets would be seized.

Russia's frozen assets could finally have a role in funding Ukraine, used as collateral in a new debt scheme under Western consideration, sources told the Financial Times.

The Group of Seven idea would finance Kyiv with issued debt, which Moscow would be forced to repay. Failure to do so could cost the country its sanctioned reserves, giving the West grounds to seize $250 billion in Russian assets

The reported plan has sparked criticism from the Kremlin, warning Monday that any such action would be unlawful, with Russia ready to legally counter the initiative.

"Of course, the Russian Federation will challenge such decisions, we will protect our interests and our assets illegally seized," spokesman Dmitry Peskov said. "Encroachment on someone else's property undermines all the foundations of the economic system, including the economic system of those who will implement these decisions."

Though the plan has yet to be publicly presented, it's become a leading option among G7 nations after being originally circulated by the Belgian government, sources said. Part of the appeal comes from the fact that it sets aside legal questions around the assets' seizure, presenting a way to support war-torn Ukraine without directly pulling from the reserves.

How to put these funds to use has fueled a steady dispute among Western ranks, but with a compromise necessary as funding for Kyiv dries up.

Though the European Union has recently unlocked $54 billion in additional aid, it didn't come without struggle. Meanwhile, US brinkmanship is keeping Washington sidelined, with further Ukraine funding unlikely ahead of the election

Some, such as former Treasury Secretary Larry Summers, have called to transfer Russia's reserves directly to Ukraine. Others have agreed that it's a fitting retribution for Moscow's invasion, as that already broke international norms.

But others have cited concern that this could risk financial instability, or prompt unwanted responses from Moscow. The German government has instead supported seizing the returns generated by the assets, but leave the underlying reserves untouched.

"Using the assets as collateral to raise debt is an attempt to find a compromise between different viewpoints around the table, both within the EU and ... the G7," an involved official told FT.