G7 finance chiefs support plan to take advantage of Russia’s frozen assets to finance Ukraine

Stay up to date with free updates

Simply sign in War in Ukraine myFT Digest — delivered directly to your inbox.

G7 finance ministers have backed the idea of ​​granting a loan to Ukraine, backed by profits from frozen Russian assets, in an effort to secure funding for Kiev beyond 2024.

The ministers’ discussions were based on a US proposal made before the meeting in Stresa, Italy, to issue loans of about $50 billion to be repaid with profits from about 190 billion euros in assets. Russian central bank. Russian assets are stuck at Belgium’s Euroclear securities depository.

According to a draft communiqué seen by the Financial Times, ministers said they were “making progress” on options to “deliver” returns. They added that G7 leaders will be given options on how to structure the loan before the summit in June.

They also vowed to continue pressuring China to cut industrial subsidies they believe are bankrupting Western rivals, saying the implementation of the most important global tax deal in more than a century is the “top priority”.

The G7 – a group of advanced economies that includes all of Ukraine’s major Western allies – wants to secure its future. sponsor Kiev beyond this year, when key elections take place on both sides of the Atlantic.

Since Russia’s invasion, Ukraine has relied heavily on Western aid for military support and to fund vital public services.

According to people familiar with the discussions, many details of the loan have yet to be agreed, including the amount, who will issue it and how it will be guaranteed if Ukraine defaults or if profits fail. reality.

One official said that Europeans are especially concerned about “fair risk sharing”, fearing that Europe will bear the financial and legal risks as well as retaliation from Russia because most of the assets are held on this continent.

The US has also pushed the rest of the G7 to increase their statements on trade tensions with Beijing.

China’s manufacturing subsidies have weakened “workers, our industries and our economic recovery,” the draft communiqué said, adding that the group would “ continues to monitor the potential negative impacts of overcapacity and will consider taking steps to ensure a level playing field.”

However, there is disagreement about what the next steps might be.

While the Biden Administration has quadrupled tariffs on Chinese electric vehicles and introduced stronger tariffs on other cleantech imports to protect green manufacturing jobs in the US, The European Commission supports investigations into Chinese subsidies for solar panels, railways and electric vehicles. Beijing retaliated against chemical imports from both the US and Europe.

EU members, which are more dependent on export trade with Beijing, have been more reluctant to impose tariffs for fear of escalating the trade war. “Trade wars only have losers, you cannot win them,” Christian Lindner, German Finance Minister, said this week.

While ministers say making the global two-tier tax deal agreed by more than 135 countries in 2021 a reality is a “top priority”, the end-of-June deadline for signing the pact cements a The hard part can be met.

Ministers, including the US Secretary of the Treasury Janet Yellensaid opposition from India is delaying progress on so-called Pillar One, which reallocates some of countries’ powers to tax multinationals to where they sell.