It has been announced that G7 finance chiefs will hold a meeting in Italy on 24-25 May 2024. is a search for common ground on how to use frozen Russian assets to support Ukraine’s war effort and how to respond to China’s growing export capability in this key markets.
This community, where industrially developed countries such as the United States of America (USA), France, Italy, Germany, Canada, Japan and United Kingdom come together to discuss issues such as financial crises, monetary systems and oil shortages, has been exchanging ideas for weeks on how to best use Russian financial assets worth approximately $300 billion, which were frozen after Moscow’s attack on Ukraine in 2022.[1]
The US is considering the options of issuing a bond or, more likely, providing Ukraine with a loan of up to $50 billion in the near term to highlight the proceeds from these assets. However, many legal and technical problems need to be resolved. In this case, it is unlikely that a detailed agreement will be reached in Stresa, so it is possible that informal talks will be held in Puglia between 15-17 June 2024, aiming to present a proposal at this meeting.
However, the G7’s idea of issuing bonds for Ukraine appears to have lost ground with the US proposal for a loan backed by a revenue stream from currently frozen assets. This will be a step towards solving Ukraine’s major financial problems, and at the same time protecting aid to Ukraine after possible political turmoil in the US. It is not clear who will manage the loans, how future profits will be forecast and what will be the situation in the event of a peace treaty with Russia. For this reason, European officials preferred to be cautious in this regard and stated that the process could be prolonged. These fears of Europe clearly explain why the US and UK have not been able to muster much support for more ambitious plans to confiscate all of Russia’s frozen assets to help Ukraine.
Italian Finance Minister Giancarlo Giorgetti, as an official who assumed the presidency of the G7 this year, stated in a speech in February that finding a legal basis for seizing Russian state assets is a very difficult and complex situation, while his French counterpart Bruno Le Maire made clearer statements, arguing that there is no legal basis.[2]
Countries such as Indonesia and Saudi Arabia are very concerned about keeping their own reserves in Europe, pressing for their assets in EU capitals not to be confiscated. The main reason for the concern is whether their Money is safe. However the US defends the right to legitimately confiscate its assets against Russia’s aggressive policies. At the same time, keeping the Money in Europe neutralizes the unilateral actions of the US. Other countries have also been adversely affected by this war of Russia, especially given its impact on the economies of the G7 countries, and therefore have tried to take steps to force Moscow to stop the aggression.[3]
The foreign aid package passed by Congress gave the US the authority to seize Russian assets. Since the US has a share of only $5 billion in Russian state assets, it is easier for the US to take a tougher stance than European states.
In addition to these sanctions against Russia, it can be said that the West is also turning to a trade war against China. After global trade prospect announced sharp increases in the group of electric vehicle batteries, computer chips and medical products imported from China, the Italian Finance Minister stated that the tensions caused by the US steps turned into a trade war.[4] This also poses the risk of fragmentation of global trade.
In a statement made in Frankfurt on May 22, 2024, US Treasury Secretary Janet Yellen emphasized the need for the US and Europe to address the ‘’risks’’ arising from Chinese imports in a strategic and unified manner, and stated that this step will be supported on both sides of the Atlantic, as well as the development of domestic clean energy industries.
Other topics to be discussed at Stresa include an overview of the place of artificial intelligence in the global economy and the sanctions imposed on Russia. Italy aims to focus on the impact of artificial intelligence on employment and inequality.
At this meeting, where ideas were exchanged on how best to use Russian financial assets frozen after Moscow’s attack on Ukraine, the idea of the G7 to issue bonds to Ukraine seems to have been weakened by the US loan proposal supported by the income stream from frozen assets. Credit management will remain uncertain in the event of forecasting of possible future profits and a peace treaty with Russia.
As a result, the reason why the US and Britain could not gather support for more ambitious plans is the concern of European states about their own reserves. The sharp increases brought by the US to the products imported from China have caused tensions in global trade and increased the risk of trade war. The Italian Minister of Finance emphasized that this situation brings with it the risk of fragmentation of global trade. This US Treasury Secretary, on the other hand, pointed out that the US and Europe should strategically address the ‘’risks’’ arising from Chinese imports.
[1] “G7 finance chiefs seek common line on Russian assets, China”, Reuters, https://www.reuters.com/world/g7-finance-chiefs-seek-common-line-russian-assets-china-2024-05-22/, (Date of Accesion: 22.05.2024).
[2] “G7 says full confiscation of Russian assets no longer on the table, seeks alternatives”, UNN, https://unn.ua/en/news/g7-says-full-confiscation-of-russian-assets-no-longer-on-the-table-seeks-alternatives-ft, (Date of Accesion: 21.05.2024).
[3] Ibid.
[4] Ibid.
