This week's G7 finance ministers' meeting in Italy will seek consensus on how to use frozen Russian assets to support Ukraine's war effort and how to address China's growing export strength in key markets, officials said.
Finance ministers and central bank governors from the Group of Seven (G7), including the United States, Japan, Germany, France, the United Kingdom, Italy, and Canada, will meet on Friday and Saturday in the lakeside town of Stresa in northern Italy.
G7 negotiators have been discussing for weeks how best to utilize approximately $300 billion in frozen Russian financial assets, which include major currencies and government bonds, frozen shortly after Moscow's invasion of Ukraine in February 2022.
The United States is pushing to use future returns on these assets, possibly through issuing bonds or more likely by providing loans to Ukraine, which could provide up to $50 billion in short-term funding.
However, multiple officials noted that a detailed agreement is not expected in Stresa, as many legal and technical issues need to be resolved.
In this context, informal negotiations will continue with the aim of proposing a plan at the G7 government heads' summit in Puglia, southern Italy, from June 13 to 15.
The idea of issuing G7 bonds for Ukraine seems to have lost support, with the U.S. now proposing loans guaranteed by the returns on frozen assets.
Key issues yet to be clarified include who will manage the loans (the World Bank or other agencies), how they will be secured, how to estimate future returns, and what happens in the event of a peace agreement with Russia.
European officials are particularly cautious, with one EU diplomat stating that a final decision could take “weeks or even months.”
Legal Implications
Italy, holding the G7 presidency this year, has its economic minister Giancarlo Giorgetti stating last week that the U.S. proposal to use Russian assets "has quite severe legal implications" that still need clarification.
Japanese Finance Minister Shunichi Suzuki also emphasized that any agreement must comply with international law.
Russia has repeatedly warned the West of consequences if its assets are used and has accused Washington of coercing Europe into more aggressive measures to thwart its actions in Ukraine.
Following the U.S. announcement last week of high tariffs on a series of Chinese imports, including electric vehicle batteries, computer chips, and medical products, global trade outlook will be another core topic at the Stresa meeting.
Giorgetti remarked after the U.S. move that it reflects geopolitical tensions and warned of the risk of "fragmentation" in global trade.
While the U.S. has not asked its partners to take similar measures against China, an official indicated that the U.S. might push for the G7 communiqué to express shared concerns about Chinese industrial "overcapacity."
U.S. Treasury Secretary Janet Yellen stated in Frankfurt on Tuesday that the U.S. and Europe need to respond to the threat of Chinese imports "strategically and unitedly" to sustain transatlantic manufacturers and promote domestic clean energy industries.
According to the official agenda released by the Italian presidency, the Stresa meeting will also discuss the impact of artificial intelligence on the global economy and take stock of sanctions on Russia.
Taxation will also be on the agenda, with Italy attempting to revive the global minimum tax agreement signed by about 140 countries in 2021 but not fully implemented due to opposition from countries including the U.S.
The global wealth tax proposal, promoted by Brazil and France within the broader Group of Twenty (G20), will also be discussed in Stresa, although an official revealed the U.S. opposes it.
