G7 moves towards agreement on money for Ukraine from frozen Russian assets

Finance officials from the Group of Seven rich democracies said they had moved towards agreement on a US proposal to squeeze more money for Ukraine from Russian assets frozen in their countries.

But the ministers left a final deal to be worked out ahead of a June summit of national leaders.

“We are making progress in our discussions on potential avenues to bring forward the extraordinary profits stemming from immobilised Russian sovereign assets to the benefit of Ukraine,” the draft statement said, without providing details.

Andrew Bailey, governor of the Bank of England, represented the UK.

Despite the progress made at the the meeting in Stresa, on the shores of Lago Maggiore in northern Italy, a final decision on how the assets will be used will rest with the G7 national leaders, including US President Joe Biden, next month at their annual summit in Fasano, in southern Italy.

“It is not an easy task but we are working on it,” he said at a news conference following the end of the meeting.

Ukrainian finance minister Serhiy Marchenko joined the fellow ministers and central bank heads at their concluding session on Saturday.

“I am satisfied with the progress,” he told journalists afterwards. He said the G7 ministers “are working very hard to find a reliable construction for Ukraine”.

The US Congress has passed legislation allowing the Biden administration to seize the roughly five billion dollars (£3.9 billion) in Russian assets located in the US, but European countries have a strong voice in the matter since most of the 260 billion dollars (£204 billion) in Russian central bank assets frozen after the February 24 2022 invasion are held in their jurisdictions.

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 is only around three billion dollars (£2.3 billion) a year — about one month’s financing needs for the Ukrainian government.

US Treasury Secretary Janet Yellen is pushing for borrowing against the future interest income from the frozen assets. That would mean Ukraine could be given as much as 50 billion dollars (£39 billion) immediately.

But the proposal has run into concerns from European members about the legal complexities, and about concerns that Russia could retaliate against the diminished number of Western companies and individuals who still have holdings in Russia, or against the Euroclear securities depository in Belgium where the bulk of the funds is held.

The ministers also discussed what to do about China’s outsized, state-backed production of green energy technology, which the US considers a threat to the global economy.

The US has imposed major new tariffs on electric vehicles (EVs), semiconductors, solar equipment and medical supplies imported from China. Included is a 100% tariff on Chinese-made EVs, meant to protect the US economy from cheap Chinese imports.

The US position has been that Chinese overcapacity is an issue not just for the US but also for other G7 and developing countries. That is because China’s selling of low-priced goods threatens the existence 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 countries are Canada, France, Germany, Italy, Japan, the UK and the US. Representatives of the European Union also take part, but the EU does not serve as one of the rotating chairs.