U.S. pushes G7 to leverage Russian assets for Ukraine aid

Yellen spoke with journalists on the first day of the conference in Stresa, northern Italy, which was attended by ministers and central bank governors of the G7 and representatives from the European Union.

The head of the U.S. Department of the Treasury proposed using the future income from frozen Russian assets, worth nearly CAD 450 billion, as collateral to provide Ukraine with a loan of around CAD 68 billion.

We must also continue our collective work on more ambitious options, considering all relevant risks and acting together. Our teams have extensively engaged on this in recent weeks, and I’m committed to working with my colleagues to present concrete options to Leaders as we look toward the Apulia Summit - Yellen told journalists.

She emphasized that "failure to take additional action is not an option" in support of Ukraine, and it is also crucial to show Vladimir Putin that he "cannot simply wait out our coalition."

The debate regarding the potential use of Russian money and securities, frozen shortly after the invasion of Ukraine, has been ongoing for many months. More than 2/3 of these assets are in the European Union and generate around CAD 5 billion in net profit annually. However, the idea of using them for Ukraine has not yet been approved by European countries in the Group, who fear both the lawsuits Russia has promised to initiate against them and the consequences of such a decision for the valuations of the dollar and the euro - AFP recalls.

Italy's economy minister, who is hosting the conference, does not hide - as AFP reports - how serious an issue the matter of Russian assets is, but he promises that Rome will be an "honest mediator" in this "very delicate" discussion.

In April, Moscow issued a "thinly veiled" threat to Italy when it "temporarily" took over the Russian subsidiary of the Italian group Ariston, justifying it as a necessary response to the "hostile actions" of the U.S. and its allies - the French agency reminds.

Russia has also threatened that the seizure or use of its assets would be tantamount to "theft," which would result in lawsuits lasting "many decades." EU countries, especially Germany and France, fear legal complications, consequences for the euro's stability, and retaliation from the Kremlin.

However, Yellen, who has long advocated for using these funds as collateral for loans on the international market, already stated in February that international law provides justification for using Russian assets to reconstruct Ukraine, which will need around CAD 660 billion.

British Foreign Secretary David Cameron indicated as early as the end of 2023 that the United Kingdom could take such steps jointly with the U.S. if other G7 countries do not.

Reuters reminds that frozen Russian funds are primarily held in major currencies and government bonds.

The U.S. secretary also mentioned that during the conference, lasting until Saturday, she will seek to establish a "clear and united front" against China's excessive production capacity, which, by flooding global markets with cheap products, threatens companies worldwide, including in emerging markets like Mexico and South Africa.

As AFP explains, the West is concerned about the colossal subsidies the Chinese government provides to enterprises in sectors such as advanced technology, green energy, electric vehicle production, and the batteries necessary for them. Cheap products from China threaten and unfairly compete with those operating strictly on market principles.

For now, however - adds the agency - Washington, opposing Beijing's policy in this regard, acts as a "lone wolf" since the European Commission has so far initiated only a few investigations into government subsidies for China's green technology sector.