This week, the Group of Seven (G7) finance ministers will hold a meeting in Italy to discuss how to utilize frozen Russian assets to help increase funding for Ukraine’s war efforts and to address the growing export power of China in key sectors.
The G7 finance ministers’ meeting will take place in Stresa, a small lakeside town in northern Italy, with representatives from the United States, Japan, Germany, France, the United Kingdom, Italy, and Canada gathering on Friday and Saturday. Italy currently holds the rotating chairmanship of the G7.
In recent weeks, negotiators from the G7 have been discussing the best ways to make use of approximately $300 billion worth of Russian financial assets, including major currencies and government bonds that were frozen shortly after Moscow’s invasion of Ukraine in February 2022.
An anonymous senior official from the U.S. Treasury Department told Reuters that the G7 ministers are working towards a plan to provide Ukraine with sufficient funds to meet both its mid-term war and civilian needs, sending a signal to Russia that it cannot outmatch the Western powers financially. The purpose of the meeting is to present a proposal at the G7 summit of government leaders scheduled for June 13-15 in Puglia, southern Italy.
Specific details such as who will manage the loans, whether it will be the World Bank or other institutions, how to secure the funds, estimate future profits, and what will happen in case of a peace agreement with Russia are all issues to be clarified at this meeting.
European officials are particularly cautious, with one EU diplomat stating that it will take “several weeks or even months” to make final decisions.
Meanwhile, the U.S. is exploring ways to increase future revenue from these assets, including issuing bonds or possibly providing a loan to Ukraine that could reportedly offer up to $50 billion in funds in the short term.
However, several officials from the G7, including the U.S., have indicated that detailed agreements are not expected to be reached in Stresa due to many unresolved legal and technical issues.
The U.S. Treasury official mentioned, “We don’t expect to finalize the terms this weekend,” referring to legal documents outlining basic investment terms and conditions.
Italian Economy Minister Giancarlo Giorgetti stated last week that the U.S. proposal regarding the use of Russian assets has “significant legal implications” that still need clarification.
Russia has repeatedly warned the West of dire consequences if its assets are utilized.
Additionally, the U.S. recently announced a substantial increase in tariffs on a range of Chinese imports, including electric vehicle batteries, computer chips, and medical products. The impact of this move on future global trade is expected to be another key topic at the Stresa meeting.
Giorgetti, following the U.S.’s announcement, commented that a “trade war” is looming, reflecting geopolitical tensions. He cautioned that the global business landscape faces the risk of “fragmentation.”
The U.S. has not urged other partner countries to take similar measures against China, but an official hinted that the U.S. may push for the G7 to express shared concerns in their communique regarding Beijing’s industrial overcapacity.
U.S. Treasury Secretary Janet Yellen stated in Frankfurt on Tuesday that the U.S. and Europe need to address the threat of imports from China in a “strategic and unified manner” to support manufacturers on both sides of the Atlantic and promote the development of clean energy industries domestically.
French Finance Minister Bruno Le Maire emphasized on Wednesday that Europe and the G7 must “stand united” in addressing China’s industrial overcapacity.
Taxation issues will also be on the agenda at the meeting. Italy will seek to revive an agreement on a global minimum tax for multinational corporations. The agreement was signed by around 140 countries in 2021 but has yet to be fully implemented due to opposition from the U.S. and several other countries.
According to officials, the proposal advocated by Brazil and France in the broader Group of Twenty industrialized nations to levy a global wealth tax on billionaires will also be discussed in Stresa, but has been met with resistance from the U.S.
As per the official agenda released by the rotating chair Italy, other topics to be discussed in Stresa include the impact of artificial intelligence on the global economy and a “stocktaking” of sanctions against Russia.
(This article is based on reports from Reuters)