G7 officials make progress on money for Ukraine from frozen Russian assets

 The Ukrainian flag, top, flies with other European flags outside the European Parliament, July 5, 2022, in Strasbourg, France. [AP Photo]

Finance officials from the Group of Seven rich democracies said they had moved toward agreement on a U.S. proposal to squeeze more money for Ukraine from Russian assets frozen in their countries. But the ministers left a final deal to be worked out ahead of a June summit of national leaders.

"We are making progress in our discussions on potential avenues to bring forward the extraordinary profits stemming from immobilized Russian sovereign assets to the benefit of Ukraine," the draft statement said, without providing details.

Despite the progress made at the meeting in Stresa, on the shores of Lago Maggiore in northern Italy, a final decision on how the assets will be used will rest with the G7 national leaders, including U.S. President Joe Biden, next month at their annual summit in Fasano, in southern Italy.

Host Finance Minister Giancarlo Giorgetti said that "progress has been made so far" but that there were "legal and technical issues that have to be overcome."

"It is not an easy task, but we are working on it," he said at a news conference following the end of the meeting.

Ukrainian Finance Minister Serhiy Marchenko joined the finance ministers and central bank heads at their concluding session on Saturday. "I am satisfied with the progress," he told journalists afterward. He said the G7 ministers "are working very hard to find a reliable construction for Ukraine."

The U.S. Congress has passed legislation allowing the Biden administration to seize the roughly $5 billion in Russian assets in the U.S., but European countries have a strong voice in the matter since most of the $260 billion in Russian central bank assets frozen after the Feb. 24, 2022, invasion are held in their jurisdictions.

Citing legal concerns, European officials have balked at outright confiscating the money and handing it to Ukraine as compensation for the destruction caused by Russia.

Instead, they plan use the interest accumulating on the assets, but that's only around $3 billion a year — about one month's financing needs for the Ukrainian government.

U.S. Treasury Secretary Janet Yellen is pushing for borrowing against the future interest income from the frozen assets. That would mean Ukraine could be given as much as $50 billion immediately.

But the proposal has run into concerns from European members about the legal complexities, and about concerns that Russia could retaliate against the diminished number of Western companies and individuals who still have holdings in Russia, or against the Euroclear securities depository in Belgium where the bulk of the funds is held.

Russia has published a decree from President Vladimir Putin allowing confiscation of assets of U.S. companies and individuals as compensation for any Russian assets seized in the United States.

The ministers also discussed what to do about China's outsized, state-backed production of green energy technology, which the U.S. considers a threat to the global economy. The U.S. has imposed major new tariffs on electric vehicles, semiconductors, solar equipment and medical supplies imported from China. Included is a 100 per cent tariff on Chinese-made EVs, meant to protect the U.S. economy from cheap Chinese imports.

The U.S. position has been that Chinese overcapacity is an issue not just for the U.S. but also for other G7 and developing countries. That's because China's selling of low-priced goods threatens the existence of competing companies around the world.

The G7 is an informal forum that holds an annual summit to discuss economic policy and security issues. The member countries are Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. Representatives of the European Union also take part, but the EU does not serve as one of the rotating chairs.