Over the past three days, finance ministers from the Group of Seven (G-7) met in Stresa, Italy, on the shores of Lake Maggiore, to discuss what to do with Russian money. After Russia's full-scale invasion of Ukraine in 2022, the G7 countries froze about $300 billion in Russian assets in the West, most of which are in Belgium, France and Germany. Yesterday, G7 finance ministers said they were making "progress" under a plan to use future interest generated by the assets to lend to Ukraine. Reports say this loan could reach fifty billion dollars and could move forward as soon as the June 13-15 G7 leaders' summit in southeastern Italy. Below, Atlantic Council experts follow the money, writes the Atlantic Council.
The tipping point for Ukraine's sovereign debt - by Charles Litchfield Deputy Director and C. Boyden Gray Senior Fellow of the Atlantic Council's Geoeconomics Center.
The statement from the G7 finance ministers is not as non-committal as it sounds. It is now favoring one approach to mobilizing Russia's frozen sovereign assets for Ukraine: transferring the value of interest income through a massive sovereign loan, worth more than half of Ukraine's total spending this year.
Earlier this year, Germany, Italy and France, along with Japan, resisted pressure from the United States and other countries to consider outright seizing the assets. It is a very significant achievement that in a relatively short period of time the seven have united around an approach that provides a very large amount without crossing anyone's red lines.
Given the speed with which the Europeans got behind the proposal, it can be safely interpreted that there is goodwill on all sides to resolve the outstanding technical details. European Union (EU) sanctions legislation that keeps assets frozen must be renewed by consensus every six months. The European Council is unlikely to change this to an "unless and until" provision, although it has made a political commitment to keep the assets frozen until Russia leaves Ukraine and pays reparations. The solution is for all countries to bear some of the financial risk, and the United States appears willing to do so as well.
We should expect more progress at the G7 leaders' summit on June 13 and 14 in southeastern Italy. It may take a few months after that for the money to start flowing, but the G7 has clearly passed the point of no return to this very constructive approach.
Get the best deal available now and keep pushing for the rest - by Daniel Fried, Weiser Distinguished Fellow at the Atlantic Council, former US Ambassador to Poland and former US Assistant Secretary of State for Europe.
The G7 appears to be nearing a deal to use a significant amount of Russian money to pay for Russia's war of national destruction against Ukraine. While not enough, it's a big step and needs to be nailed down quickly.
Almost immediately after Russia's full-scale invasion of Ukraine in February 2022, the G7, acting quickly, immobilized nearly $300 billion in Russian sovereign assets. Since then, the G7 has been considering whether, and if so, how this money could be used to benefit Ukraine. After months of discussion and indecision, G7 finance ministers appear to be nearing consensus on using twenty years' worth of interest on immovable assets, which could amount to around fifty billion dollars, as collateral for a (probably interest-free) loan. of Ukraine.
Many experts (such as former US diplomat Philip Zelikov) have made strong arguments for using all Russian assets for Ukraine. But European resistance (notably from Germany and France) held up the deal for months as Ukraine's needs became increasingly urgent. Representatives of the Biden administration decided to push for the best deal available - the fifty billion dollar deal. If I were them, I'd do the same: Take what you can get now, and keep pushing for the rest.
Continuation of this deal would be welcome. But the delay in moving toward a solution — and the limited nature of the tentative deal — illustrate a problem: Russia is an aggressive and dangerous nation waging war on one neighbor, threatening others and trying to intimidate Europe into allowing the Kremlin to reassemble the Russian empire , through violence. Peacetime norms must give way to norms suited to the harsher era ahead, whether we like it or not. Those European opponents of using Russia's assets to pay for Russia's war of aggression should reconsider. Today's announcement of progress is not yet a step commensurate with what is required.
Money generated by Russian assets could help save Ukraine from freezing this winter - by Olga Hakova, deputy director for European energy security at the Atlantic Council's Global Energy Center.
As the West debates the feasibility of confiscating Russian frozen assets, Ukraine needs a huge influx of funds now to prepare its energy system for the brutal winter ahead, minimize debilitating blackouts this summer and protect its remaining infrastructure from Russian bombings. The energy sector has been a major target of Moscow's genocidal campaign, and these strategic attacks have intensified this spring with a focus on central power generation — the largest thermal power plants that provide Ukrainians with essential services and keep industry and business running despite the war.
Before G7 finance ministers met in Stresa, the EU agreed in principle to a fifty billion dollar bond proposal for frozen assets, of which up to 90 percent would be earmarked for weapons and military equipment. At first glance, this may seem irrelevant to the urgent needs in the energy sector, but it is the most effective investment in keeping the rest of the energy system protected and allowing the reconstruction and repair of life-saving infrastructure. The remaining 10 percent will go to budgetary and humanitarian support under the EU mechanism and can contribute to the purchase of gas turbines and other equipment. That money, which could start arriving as early as July if G7 leaders finalize a deal next month, could also help ease the extra cost of importing electricity from Ukraine's European neighbors that would be generated in part from the cost of the now destroyed power plants of Ukraine.
Fifty billion dollars does not come close to the cost of Russia's unprovoked horror and misery on Ukrainian citizens, the natural environment, critical infrastructure and culture. However, directing these windfalls from frozen Russian assets to Ukraine's direst needs is a small but decisive step toward setting a precedent that Russia will not escape paying for its crimes. Additionally, as the appropriation of the money changes to reflect Ukraine's priorities, a significant percentage of the profits can be directed toward recovery efforts.
U.S. obligingly takes lead on Russian assets issue - by John E. Herbst, senior director of the Atlantic Council's Eurasia Center and former U.S. ambassador to Ukraine.
No white smoke emerged from the meeting of G7 finance ministers in Stresa, Italy, this week in their preparations for next month's G7 summit. The key issue on their agenda was how to effectively deal financially with the greatest current threat to global security and prosperity: Vladimir Putin's determination to dominate Ukraine. Small, sensible steps have been taken on additional sanctions against Russia, for example in energy. But the big part was, of course, about $300 billion of Russian state assets frozen in the international financial system. The EU recently took a small step by allowing the use of dividends from these assets to be transferred to Ukraine. This could provide Ukraine with several billion dollars a year.
But we should note that the White House Deputy National Security Adviser for the International Economy, Daylip Singh, is leading an initiative and the United States has been seeking a more ambitious approach for months: bundling several years of interest payments to allow for a payment of fifty billion dollars. US Treasury Secretary Janet Yellen gave her support for this in Stresa, and reports indicate she has made some progress.
With three weeks until the G7 summit, there is time to get that deal done. But while Canada and the UK are interested in the US proposal, other G7 members are concerned about possible Russian retaliation, and there has also been futile lobbying by China and Saudi Arabia against the transfer of assets to Ukraine. So the success of the summit in Italy cannot be taken for granted. But it is good to see the United States in the lead on a key issue related to the war, and if US President Joe Biden and Yellen go ahead as planned in Puglia, the United States may accept the proposal advanced brilliantly by Philip Zoelikoff, Bob Zoelick and Larry Summers to returned for the remaining $250 billion of Russian state assets.