G7 Finance Ministers are convening amidst the ongoing conflict between Russia and Ukraine, exploring new avenues to continue providing assistance to Ukraine. According to a draft statement seen by Reuters, the finance ministers on Saturday (May 25) indicated that the G7 will discuss how to utilize future income from frozen Russian assets to help Ukraine, focusing on addressing the issue of overproduction caused by China.
Shortly after Moscow’s invasion of Ukraine’s Eastern European neighbors in February 2022, the G7 and its allies froze around $300 billion in Russian assets.
The draft statement stated, “We are discussing potential pathways to channel windfall profits from Russia’s immobilized sovereign assets to benefit Ukraine.”
For weeks, negotiators from the G7 have been deliberating on how best to utilize these assets, such as major currencies and government bonds, most of which are held in European custodial institutions.
The United States has been urging its G7 partners – Japan, Germany, France, the UK, Italy, and Canada – to support providing Ukraine with up to $50 billion in loans in the short term.
The wording of the statement is cautious, devoid of specific figures or details, reflecting that there are still many legal and technical issues to be resolved before such loans can be disbursed.
A G7 official informed Reuters that the statement will not undergo significant changes before its final version is released later on Saturday.
Ukrainian Finance Minister Serhiy Marchenko is also set to engage with the ministers on Saturday. After over two years of continued invasion by Moscow, war-ravaged Ukraine is striving to curb Russia’s advances in the north and east regions.
The statement highlights that finance ministers and central bank governors aim to present proposals during this meeting on the issue of funding for Ukraine, for deliberation by G7 government leaders at a summit in mid-June.
The G7 stated, “Sovereign assets of Russia within our jurisdictions will continue to be frozen in accordance with our respective legal systems until Russia pays the price for the damage it has caused to Ukraine.”
The G7 Finance Ministers’ meeting is being held in Stresa, northern Italy, and will last for two days. Another central theme of this meeting is China’s growing export prowess and the industrial “overcapacity” issue articulated by the G7 ministers.
The statement reads, “We express concerns over China (the CCP) employing non-market policies and practices. These policies and practices harm our workers, industries, and economic resilience.”
“We will continue to monitor the potential negative impacts of overcapacity and consider taking measures to ensure a fair competitive environment in line with the principles of the World Trade Organization (WTO).”
Last week, the United States announced a significant increase in tariffs on a range of Chinese imported products, including electric vehicle batteries, computer chips, and medical products.
Washington has not yet urged its allies to take similar measures, but Treasury Secretary Janet Yellen stated this week that she hopes the G7 will strongly oppose China’s industrial and trade policies.
The 13-page draft statement also outlines that the G7’s objective is to sign the first pillar of the agreement on a global minimum tax rate for multinational corporations by the end of next month.
The first pillar aims to reallocate taxing rights on around $200 billion in corporate profits of digital giants primarily headquartered in the US, allowing countries where these companies conduct business to levy taxes on them.
At Japan’s request, the G7 Finance Ministers also reaffirmed their commitment to exchange rate stability, cautioning against excessive disorderly fluctuations in exchange rates.
Tokyo believes that this agreement within the G7 provides the freedom to intervene in currency markets to counter excessive fluctuations of the Japanese yen.
As per the draft, the G7 also called on Israel to maintain correspondent banking ties between Israeli and Palestinian banks to allow crucial transactions, trade, and services to continue.
This echoes a warning issued by US Treasury Secretary Janet Yellen on Thursday, urging not to sever vital financial lifelines to the embattled territories.