Senior financial officials from the world’s advanced economies sought agreement Saturday on how to use Russia’s frozen central bank balances to support Ukraine and vowed to unite against China’s dumping of cheap exports into their markets to boost their economic strength to deal with twin crises to bundle.
The endorsement of more ambitious sanctions and protectionism came as Group of Seven finance ministers met for three days in Stresa, Italy. The proposals under debate could deepen the divide between the alliance of wealthy Western economies and Russia, China and their allies, exacerbating a global fragmentation that worries economists.
The Group of Seven’s efforts to influence the two powerful rivals have had limited success in recent years, but the rich countries are making renewed pushes to test the limits of their shared economic power.
In a joint statement or communiqué to be released on Saturday, policymakers said they would remain united on both fronts as geopolitical crises and trade tensions emerged as the biggest threats to the global economy.
“We are making progress in our discussions about possible ways to leverage the extraordinary gains from immobilized Russian state assets for the benefit of Ukraine,” said the statement, which was reviewed by The New York Times.
Regarding China, finance ministers expressed concern about the “extensive use of non-market policies and practices that undermine our workers, industries and economic resilience.” They agreed to monitor the negative impact of China’s overcapacity and “take measures to ensure a level playing field.”
Growing concerns about dealings with Russia and China dominated three days of meetings on the shores of Lake Maggiore. The U.S. is pushing for a tougher approach to dealing with Russia’s assets and China’s exports, while European countries are taking a more cautious approach to managing their internal divisions.
Business leaders spent much of their time grappling with the details of how they would go about unlocking the Russian central bank’s $300 billion worth of frozen assets to provide a longer-term aid stream to Ukraine starting next year.
“The crucial point is to ensure the right, strong and long-term financing of the Ukrainian government,” Bruno Le Maire, the French finance minister, said on the sidelines of meetings on Friday. “They need our support and can rely on the joint support of all G7 countries.”
On Saturday, a U.S. proposal gained momentum to use the windfall from those assets to create a loan for Ukraine worth up to $50 billion that could be backed by some Group of Seven countries .
“This is really the most important option being considered,” Treasury Secretary Janet L. Yellen said Saturday following the meeting. “There seems to be broad support for the general idea that this is a productive way forward.”
But unanswered questions remained, including how countries would share the risk burden associated with the loan if interest rates fell, which would reduce the profits generated from the assets, and what would happen to the loan when the war eventually ended. Another complicating factor in using the assets to secure a long-term loan is that European Union sanctions authorizing the immobilization of most of these Russian assets must be periodically renewed.
Finance ministers will be working hard over the next three weeks to work out the details of their options. They expect Group of Seven leaders to decide how to proceed when they meet next month in Italy.
The urgency to reach a deal has increased as international war weariness makes it harder for the United States and Europe to continue delivering aid packages to Ukraine. The looming elections around the world, and particularly in America, have increased pressure to provide future financial resources to Ukraine.
“It would be nice to lock down this mechanism so that you have $50 billion to play with regardless of the outcome of the U.S. election,” said Charles Lichfield, a senior fellow at the Atlantic Council.
Although Russia dominated the talks, fears were high about the threat posed by China’s excess industrial capacity. Policymakers fear a flood of heavily subsidized Chinese green energy technology products will cripple the clean energy sectors in the United States and Europe, leading to job losses and a reliance on China for solar panels, batteries, electric vehicles and other products.
President Biden last week increased tariffs on some Chinese imports, including imposing a 100 percent tax on electric vehicles, leaving in place taxes imposed by President Donald J. Trump on more than $300 billion in Chinese goods. This week, Ms. Yellen called on Europe and the Group of Seven to more forcefully confront China over its trade practices.
“We need to stand together and send a unified message to China so that they understand that it is not just one country that thinks this way, but that they are facing a wall of resistance to the strategy that they are pursuing,” Ms. Yellen said a press conference press conference to open the meetings.
European countries are conducting their own investigations into China’s trade practices and considering further tariffs. However, they are taking different approaches and some countries, such as Germany, fear that a trade dispute with China would harm their own economies, which rely heavily on exports to the Chinese market. German Finance Minister Christian Lindner warned that trade wars are “all about losing.”
There were signs this week that both China and Russia are preparing their responses to the Group of Seven’s actions.
The Chinese Chamber of Commerce with the EU said on Tuesday that Beijing is considering temporarily increasing tariffs on car imports in light of new US tariffs and the prospect of new levies in Europe.
“This potential action has implications for European and U.S. automakers,” the group wrote.
At the same time, Russia is mobilizing its response to Western plans to use its assets to support Ukraine. A Russian Foreign Ministry spokeswoman called the idea of using profits from the assets an attempt to legitimize theft at the state level and said the European Union would feel the full extent of Russian retaliation.
President Vladimir V. Putin also signed a decree on Thursday saying Moscow would seek to compensate for any losses it incurs from freezing its state assets by seizing U.S. property. Although Russia has little access to U.S. government assets, it could pursue the property of private investors in Russia or funds in Russian accounts.
Ms. Yellen dismissed Russia’s threats on Saturday, noting that the country had already warned it would seize U.S. property.
“This will not stop us from moving forward and taking action to support Ukraine,” she said.
But officials in Europe, where most of Russia’s assets are located, remain aware of the potential impact. Paschal Donohoe, president of the Eurogroup, a club of European finance ministers, said the prospect of Russian retaliation had often been the subject of discussion.
“There is, of course, always the possibility that Russia will take further action in the future,” Donohoe said, saying he was confident Western allies had the authority to take the actions they were considering. “Any actions we take in terms of sanctions or additional economic measures will respect international law.”
It is uncertain whether the measures planned by the finance ministers will succeed in persuading Russia or China to change course. Despite internal differences, ministers appeared to agree that a united front was their best hope.
“The renewal of the G7’s strong unity is being forged amid the challenges posed by Russia’s brutal aggression in Ukraine and China’s growing authoritarianism and economic woes,” said Mark Sobel, a former longtime Treasury Department official and now chairman of the U.S. Treasury Department Monetary and Currency Ministry Forum for Financial Institutions.
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2024-05-25 13:30:44
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