Yellen urges ‘more ambitious’ G7 plans for Russian assets

US Treasury Secretary Janet Yellen on Thursday (23 May) urged G7 ministers meeting in Italy to work on “more ambitious options” to use frozen Russian assets to help Ukraine.

The ministers and central bankers from the Group of Seven world powers are meeting in Stresa, on the shores of northern Italy’s Lake Maggiore, to prepare for a summit of G7 heads of state next month in Puglia.

Top of the agenda is a plan to finance crucial aid to Ukraine using the interest generated by the €300 billion of Russian central bank assets frozen by the G7 and Europe.

The European Union took a first step in agreeing a deal this month to seize revenues from frozen Russian assets to arm Ukraine, a windfall that will reach €2.5 to three billion a year.

In a press conference before the meeting, Yellen welcomed this plan but added: “We must also continue our collective work on more ambitious options, considering all relevant risks and acting together.”

She said she wanted “concrete options” to present to G7 leaders, adding: “Failure to take additional action is not an option – not for Ukraine’s future and not for the stability of our own economies and the security of our peoples.”

The United States has proposed granting Ukraine, which has been fighting a Russian invasion for more than two years, up to $50 billion in loans secured by this interest.

The details of the US plan have not yet been finalised, including who would issue the debt – the US alone or G7 countries as a whole.

But it will serve as a basis for G7 discussions, according to a Treasury source in Italy, which as G7 president this year is hosting the Stresa talks.

The US proposal is an “interesting way forward” but “any decision must have a solid legal basis”, the source said.

Time is of the essence, as the slow speed of European material reaching Kyiv and the near-halt in US aid for months during wrangling in Washington have strained Ukraine’s capabilities just as Russia has regained the initiative on the ground.

In addition to the United States and Italy, the G7 includes Britain, Canada, France, Germany and Japan.

Legal issues

Yellen had initially advocated a more radical solution — the confiscation of the Russian assets themselves.

However, European countries worried about creating a precedent in international law and the risk of serious legal disputes with Moscow.

Stresa host Giancarlo Giorgetti, Italy’s economy minister, has made no secret of the complexity of the issue.

He said Rome would be an “honest mediator” in discussions but said the task was “very delicate”.

In April, Moscow sent a thinly veiled warning to Italy in its capacity as G7 chair, taking “temporary” control of the Russian subsidiary of the Italian heating equipment group Ariston in retaliation for what it called “hostile actions” by Washington and its allies.

Experts warn that any further G7 action against Russia could lead to similar reprisals hitting other European companies still operating in the country.

John Kirton, director of the University of Toronto’s G7 Research Group, said that tapping just the interest on Russian assets “would considerably reduce the legal problems”.

“Legally, it would not be confiscating the ‘assets’,” he told AFP.

France on Wednesday welcomed the US plan, saying it was hoping the G7 finance ministers would reach a deal this week.

“The Americans have made proposals that fall within the framework of international law, and we are going to work on them openly and constructively,” Economy Minister Bruno Le Maire said.

China overproduction

Yellen said the Stresa meeting would consider “additional action” against Moscow for its war in Ukraine, including to restrict its access to critical goods that support its military.

She also said the G7 ministers would discuss responses to what she called China’s “overcapacity” of key green technologies such as electric vehicles, batteries and solar panels.

The US is concerned that Chinese government support is leading to more production capacity than global markets can absorb, driving cheap exports and stifling growth elsewhere.

“Overcapacity threatens the viability of firms around the world, including in emerging markets,” she said.

She added: “It’s critical that we and the growing numbers of countries who have identified this as a concern present a clear and united front.”

[Edited by Alexandra Brzozowski]