US pushes for Ukraine aid, unified stance against China at G7 finance meeting

The United States is striving to garner support for releasing more funds for Ukraine from frozen Russian assets and to unify opposition against China’s trade practices. This effort is taking place as finance ministers from the Group of Seven (G7) leading economies began a two-day meeting on the scenic shores of Lago Maggiore in northern Italy on Friday.

U.S. Treasury Secretary Janet Yellen is advocating for “more ambitious options” to unlock some of the $260 billion in Russian central bank reserves frozen in Europe and the U.S. following the invasion of Ukraine on February 24, 2022.

With Kyiv’s financial stability appearing increasingly precarious amid a conflict that shows no signs of abating, and Russia intensifying its attacks on civilian infrastructure, aid for Ukraine is becoming more urgent.

The U.S. Congress has passed legislation allowing the Biden administration to seize approximately $5 billion in Russian assets located in the U.S. However, most of the funds are held in Europe. European officials, citing legal concerns, have been reluctant to outright confiscate these assets to compensate Ukraine for the destruction caused by Russia. Instead, they plan to use the interest accrued on these assets, which amounts to about $3 billion annually—sufficient for just one month of Ukrainian government financing needs.

One proposal is to borrow against the future interest income from these frozen assets, potentially providing Ukraine with up to $50 billion immediately.

Italian Finance Minister Giancarlo Giorgetti noted that extracting more funds for Ukraine is “legally very complicated but also politically sensitive.”

French Finance Minister Bruno Le Maire commended Yellen for abandoning a proposal that he claimed would have undermined international rule of law. He added that “the U.S. proposal is now consistent with international law.”

“Let’s compare the proposals and determine which is the most convenient, efficient, and rapid solution that can be implemented,” he said. “The key issue is not the method but ensuring the right and strong and longstanding financing of the Ukrainian government.”

Ukraine allocates almost all its tax revenue to military expenses and requires an additional $40 billion annually to pay pensions and salaries for doctors, nurses, and teachers. Initial support from allies and a $15.4 billion loan from the International Monetary Fund was thought to secure the budget for four years, but the prospect of a prolonged conflict has worsened the financial outlook for next year.

Yellen has also emphasized the need for a unified stance against China’s state subsidies for manufacturing solar panels, semiconductors, and electric vehicles. She argues that China’s production capacity exceeds both its own and the global economy’s needs, threatening the survival of competing companies in both G7 and developing countries. Ahead of the meeting, she stressed the importance of presenting a united front so that Chinese leaders recognize they face significant international opposition to their strategy.

The finance ministers are preparing to finalize decisions at the G7 leaders’ summit, scheduled for June 13-15 in Fasano, in Italy’s Puglia region.

The G7 is an informal forum where leaders discuss economic policy and security issues. Its members are Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. Representatives from the European Union also participate, though the EU does not serve as one of the rotating chairs.