The EU’s big three in the G7 — Germany, France and Italy — are urging Japan and the U.S. to use frozen Russian assets to help Ukraine, just as Europe is now seeking to do.
The European Central Bank fears using Russian assets could undermine the global credibility of the euro — but that concern could be allayed if heavyweights such as Washington and Tokyo were to take similar action.
Three officials briefed on a virtual meeting of G7 finance ministers on Wednesday said the EU trio had urged the whole group of world leading economies to act in unison on the assets.
But the final communiqué stopped short of pledging joint action. Instead, it said that using Russian assets was one of the options under consideration.
The G7 ministers said they were “developing a wide range of options to address Ukraine’s financing needs,” which “amongst others … include using, in a coordinated way, the full value of the [Russian sovereign assets] immobilized in our jurisdictions to end the war.”
The EU’s plan, not yet accepted by all member countries, would be to deploy €140 billion of frozen Russian assets as a zero-interest “reparations loan” to Kyiv.
The White House is pressuring the EU to make use of its stock of Russian central bank reserves, but has yet to say whether it will do the same with the some $7 billion it holds domestically.
Japan is also cautious about issuing a reparations loan to Ukraine using its own frozen Russian assets. That said, Japan is expected to follow Washington’s lead.
“It’s unclear what the Americans are going to do,” one official briefed on the G7 call said on the condition of anonymity to speak freely.
The next G7 meeting among finance ministers is scheduled for Oct. 15 in Washington, where policymakers will head for the International Monetary Fund’s annual meeting.
The U.K. said last month that it’s considering using billions of pounds worth of sanctioned Russian cash to finance new loans to Kyiv. Canada is also “very aligned” with the EU’s initiative, its finance minister told POLITICO on Sept. 20. Most of Russia’s frozen assets, however, reside in the EU, leaving Europe carrying most of the legal and reputational risk.
The European Central Bank is concerned about any seizure and on Tuesday again called on the European Commission, during a virtual meeting of deputy finance ministers, to demonstrate how the reparations loan will not damage the euro’s credibility, two diplomats on the call said.
The Commission is confident that national guarantees from EU countries against the €140 billion loan will be enough to allay any legal concerns. That way, the money would be repaid to Moscow immediately if the Kremlin ends its war against Ukraine and pays reparations.
To reassure its allies, Brussels even plans to set aside €45 billion of Russian cash to repay a previous G7 loan to Ukraine, agreed in 2023 and almost paid out.
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