G7 will try to use frozen Russian assets to help Ukraine

[May 25, 2024]  By Christian Kraemer and Giuseppe Fonte

STRESA, Italy (Reuters) - The G7 will explore ways of using the future income from frozen Russian assets to help Ukraine, finance chiefs from the Group of Seven industrial democracies said on Saturday, according to a draft statement seen by Reuters.

The G7 and its allies froze some $300 billion of Russian assets shortly after Moscow invaded its neighbour in February 2022.

"We are making progress in our discussions on potential avenues to bring forward the extraordinary profits stemming from immobilized Russian sovereign assets to the benefit of Ukraine," the draft statement said.

G7 negotiators have been discussing for weeks how to best exploit the assets, such as major currencies and government bonds, which are mostly held in European-based depositories.

The United States has been pushing its G7 partners - Japan, Germany, France, Britain, Italy and Canada - to back a loan that could provide Kyiv with as much as $50 billion in the near term.

The cautious wording of the statement, containing no figures or details, reflects numerous legal and technical aspects which still need to be hammered out before such a loan could be issued.

The statement will not undergo significant changes before a final version to be released later on Saturday, a G7 source said.

The ministers will be joined on Saturday by Ukraine's Finance Minister Serhiy Marchenko, whose war-torn country is struggling to contain a Russian offensive in the north and the east, more than two years after Moscow first invaded.

The finance ministers and central bankers meeting in Stresa, northern Italy, aim to present options on the issue of Ukraine funding for G7 heads of government to consider at a summit in mid-June, the statement said.

"Consistent with our respective legal systems, Russia's sovereign assets in our jurisdictions will remain immobilized until Russia pays for the damage it has caused to Ukraine," the G7 said.

CHINA CRITICISM

China's growing export strength and what G7 ministers call its industrial "overcapacity" have been another central theme of the two-day gathering in the northern Italian lakeside town.

"We express concerns about China's comprehensive use of non-market policies and practices that undermines our workers, industries, and economic resilience," the statement said.

A Ukrainian serviceman prepares to fire a 2S1 Gvozdika self-propelled howitzer towards Russian troops, amid Russia's attack on Ukraine, at a position in the Donetsk region, Ukraine May 21, 2024. REUTERS/Oleksandr Ratushniak/File Photo

"We will continue to monitor the potential negative impacts of overcapacity and will consider taking steps to ensure a level playing field, in line with World Trade Organization (WTO) principles."

The United States last week unveiled steep tariff hikes on an array of Chinese imports including electric vehicle batteries, computer chips and medical products.

Washington has not called on its allies to take similar steps but Treasury Secretary Janet Yellen said this week she wanted the G7 to express a "wall of opposition" to China's industrial and trade policies.

The 13-page draft statement also said the G7 aimed to sign off on the first pillar of an accord on a global minimum tax rate for multinationals by the end of next month.

This first pillar aims to reallocate the taxing right on mainly U.S.-based digital giants, allowing about $200 billion of corporate profits to be taxed in the countries where the companies do business.

The G7 finance leaders also reaffirmed their exchange-rate commitment warning against excessively volatile and disorderly currency moves, nodding to a request by Japan.

Tokyo has argued this G7 agreement gives it freedom to intervene in the currency market to counter excessive yen moves.

The G7 also called on Israel to maintain correspondent banking links between Israeli and Palestinian banks to allow vital transactions, trade and services to continue, according to the draft.

This echoes a warning from U.S. Treasury Secretary Janet Yellen on Thursday against cutting off a vital financial lifeline for the embattled territories.

(Writing by Gavin Jones; Editing by Keith Weir)

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