FRANKFURT – The U.S. sought to build support for squeezing more money for Ukraine out of frozen Russian assets and for uniting against China’s trade practices as finance ministers from the Group of Seven rich democracies opened a two-day meeting on Friday on the shores of northern Italy’s scenic Lago Maggiore.
U.S. Treasury Secretary Janet Yellen is pushing at the meeting in Stresa for “more ambitious options” to unlock money from some $260 billion in Russian central bank reserves frozen in Europe and the U.S. after the Feb. 24, 2022, invasion.
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Aid for Ukraine has become more urgent as Kyiv’s finances look shakier against the prospect that the conflict will last through next year and beyond, and as Russia steps up its destruction of civilian infrastructure such as power stations.
The U.S. Congress has passed legislation allowing the Biden administration to seize the roughly $5 billion in Russian assets located in the US, but most of the funds are in Europe. Citing legal concerns, European officials have balked at outright confiscating the money and handing it to Ukraine as compensation for the destruction caused by Russia. Instead they plan use the interest accumulating on the assets, but that’s only around $3 billion a year — about one month’s financing needs for the Ukrainian government.
Proposals include borrowing against the future interest income from the frozen assets, so that Ukraine could be given as much as $50 billion immediately.
Host Finance Minister Giancarlo Giorgetti said that extracting more for Ukraine “legally is a very complicated discussion but also politically sensitive.”
French Finance Minister Bruno Le Maire praised Yellen for setting aside a proposal that he said would have undermined international rule of law, and added that “the U.S. proposal is now consistent with international law.”
“Let's compare the proposals, let's see what is the most convenient, the most efficient, the most rapid proposal that could be put in place," he said. "The key point is not the method that we use, the key point is to ensure the right and strong and longstanding financing of the Ukrainian government.”
Ukraine spends almost all its tax revenue on the military and needs another $40 billion a year to continue paying pensions and the salaries of doctors, nurses and teachers. Support from allies and a $15.4 billion loan from the International Monetary Fund was initially thought to have secured the budget for four years, but the prospects of an extended conflict have darkened the outlook for next year.
Yellen has also called for a clear united front against China’s state subsidies for manufacturing of solar panels, semiconductors and electric cars, saying that China’s production capacity exceeds the needs not only of China but of the global economy as a whole and threatens the existence of competing companies in both Group of Seven and developing countries. Ahead of the meeting she said that countries needed to take a common stance so that China’s leaders understand that “they face a wall of opposition to this strategy that they are pursuing.”
The finance ministers are working to set up final decisions at the summit of G7 leaders that will take place June 13-15 in Fasano, in southern Italy’s Puglia region.
The G7 is an informal forum that holds an annual summit to discuss economic policy and security issues. The member countries are Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. Representatives of the European Union also take part, but the EU does not serve as one of the rotating chairs.