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G7 finance ministers have backed a proposal to lend to Ukraine secured by profits from frozen Russian assets to secure funding for Kyiv beyond 2024.
The ministers' discussions were based on a U.S. proposal circulated ahead of the meeting in Stresa, Italy, to issue a loan of about $50 billion to be repaid with profits from the Russian central bank's assets worth about 190 billion euros. The Russian assets are held at Belgium's central securities depository Euroclear.
Ministers were “making progress” on options to “front-load” the benefits, in a draft statement seen by the Financial Times, adding that options for how to structure the loan would be presented to G7 leaders ahead of their summit in June.
He also pledged to keep up pressure on China to cut industrial subsidies he believes are ruining Western businesses, and said implementing the first major international tax agreement in more than a century was a “top priority.”
The G7, a group of advanced economies that includes all of Ukraine's main Western allies, wants to future-proof its financial support for Kyiv beyond this year, when key elections are held on both sides of the Atlantic.
Since the Russian invasion, Ukraine has relied heavily on Western aid for military support and to fund vital public services.
Many details about the loan have yet to be agreed upon, including the amount, who would issue the loan and how it would be guaranteed if Ukraine defaults on it or benefits don't materialize, according to people familiar with the talks.
The official said European countries were particularly concerned about “fair risk sharing” and worried that because most of the assets are held on the continent, Europe would bear the brunt of financial and legal risks and retaliatory measures from Russia.
The United States is also pressuring other G7 countries to step up their rhetoric regarding the trade dispute with Beijing.
The draft statement said Chinese manufacturing subsidies were undermining “the resilience of our workers, industries and economy,” adding that the group would “continue to monitor the potential negative impacts of excess capacity and consider measures to ensure a level playing field.”
But there is disagreement over what the next steps should be.
The Biden administration has already quadrupled tariffs on Chinese-made electric vehicles and stepped up taxes on other clean-tech imports to protect U.S. green manufacturing jobs, while the European Commission backs an investigation into Chinese subsidies for solar panels, trains and electric cars. Beijing has retaliated against U.S. and European chemical imports.
EU member states, heavily dependent on exports from China, have been reluctant to impose tariffs for fear of escalating a trade war. “Trade wars only create losers. They can't be won,” German Finance Minister Christian Lindner said this week.
Ministers said their “top priority” was to deliver a global two-tier tax arrangement agreed by more than 135 countries in 2021, but an end-June deadline for signing the foundational treaties on both sides is unlikely to be met.
Cabinet members, including U.S. Treasury Secretary Janet Yellen, said India's opposition was slowing progress on so-called “Pillar 1,” which would reallocate some taxing powers on multinational companies to the place of sale.
