Frankfurt, Germany — Financial officials from the Group of Seven wealthy democracies said they had moved toward agreement on a U.S. proposal to squeeze more money for Ukraine from Russian assets frozen in their country. But ministers allowed a final agreement to be worked out ahead of a summit of national leaders in June.
“We are making progress in our discussions on possible avenues to channel the extraordinary profits resulting from immobilized Russian government bonds to the benefit of Ukraine,” the draft statement said, without providing details.
Despite the progress made at the meeting in Stresa, on the shores of Lake Maggiore in northern Italy, a final decision on how the assets will be used will rest next month with G7 national leaders, including the US President Joe Biden, during their annual meeting. summit in Fasano, in southern Italy.
Finance Minister of the host country Giancarlo Giorgetti said that “progress has been made so far” but that there are “legal and technical challenges that need to be overcome”.
“It is not an easy task, but we are working on it,” he said at a press conference after the meeting.
Ukrainian Finance Minister Serhiy Marchenko accompanied finance ministers and central bank heads at their closing session on Saturday. “I am satisfied with the progress,” he told journalists afterwards. He said G7 ministers are “working very hard to find a reliable structure for Ukraine.”
The US Congress has passed legislation allowing the Biden administration to seize the approximately $5 billion in Russian assets held in the US, but European countries have a strong voice in the matter as most of the $260 billion in Russian central bank assets have been frozen after the February elections. On August 24, 2022, invasions will be held in their jurisdictions.
Citing legal concerns, European officials have argued against outright seizing the money and handing it over to Ukraine as compensation for the destruction caused by Russia.
Instead, they plan to use the interest on the assets, but that is only about $3 billion per year – about one month of financing needs for the Ukrainian government.
US Treasury Secretary Janet Yellen is pushing for loans against future interest income from the frozen assets. That would mean that Ukraine could immediately receive as much as $50 billion.
But the proposal was met with concerns from European members about its legal complexities, as well as concerns that Russia could retaliate against the reduced number of Western companies and individuals that still have shares in Russia, or against the Euroclear securities depository in Belgium, where it Most of the money is retained.
Russia has published a decree by President Vladimir Putin authorizing the confiscation of assets of American companies and individuals as compensation for any Russian assets seized in the United States.
The ministers also discussed what to do about China's excessive state-sponsored production of green energy technology, which the US sees as a threat to the global economy. The US has imposed major new tariffs on electric vehicles, semiconductors, solar energy equipment and medical supplies imported from China. Included is a 100% tariff on Chinese-made electric vehicles, intended to protect the U.S. economy from cheap Chinese imports.
The US position was that Chinese overcapacity is not only a problem for the US, but also for other G7 countries and developing countries. That's because China's sales of low-priced goods threaten the survival of competing companies around the world.
The G7 is an informal forum that holds an annual summit to discuss economic policy and security issues. The member states are Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. Representatives of the European Union also participate, but the EU does not serve as one of the rotating chairs.
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Colleen Barry contributed from Milan.
