G7 finance ministers gather in Italy on Thursday for a three-day meeting dominated by plans to use Russian assets to help Ukraine, as well as new sanctions on Moscow and the commercial threat posed by China.
The ministers and central bankers from the Group of Seven world powers are meeting in Stresa, on the shores of northern Italy's Lake Maggiore, to prepare for the larger summit of G7 heads of state next month in Puglia.
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Top of the agenda is a plan to finance crucial aid to Ukraine using the interest generated by the 300 billion euros ($325 billion) of Russian central bank assets frozen by the G7 and Europe.
The United States has proposed granting Ukraine, which has been fighting a Russian invasion for more than two years, up to $50 billion in loans secured by this interest.
"It's vital and urgent that we collectively find a way forward to unlock the value of Russian sovereign assets immobilised in our jurisdictions for the benefit of Ukraine," US Treasury Secretary Janet Yellen said this week.
The details of the US plan have not yet been finalised, including who would issue the debt -- the US alone or G7 countries as a whole.
But it will serve as a basis for G7 discussions, according to a Treasury source in Italy, which as G7 president this year is hosting the Stresa talks.
The US proposal is an "interesting way forward" but "any decision must have a solid legal basis", the source said.
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Time is of the essence, as the slow speed of European material reaching Kyiv and the near-halt in US aid for months during wrangling in Washington have strained Ukraine's capabilities just as Russia has regained the initiative on the ground.
In addition to the United States and Italy, the G7 includes Britain, Canada, France, Germany and Japan.
- 'More ambitious options' -
The European Union took a first step in agreeing a deal this month to seize revenues from frozen Russian assets to arm Ukraine, a windfall that will reach 2.5 to 3 billion euros ($2.7-$3.3 billion) a year.
Yellen will now try to convince her G7 counterparts to consider "more ambitious options" to "provide more money to Ukraine as quickly as possible", according to a US Treasury spokesperson.
EU members of the G7 "will face continued pressure from the US to do more, with support from Canada and perhaps the UK", John Kirton, director of the University of Toronto's G7 Research Group, told AFP.
Yellen had initially advocated a more radical solution -- the confiscation of the Russian assets themselves.
But European countries worried about creating a precedent in international law and the risk of serious legal disputes with Moscow.
Stresa host Giancarlo Giorgetti, Italy's economy minister, has made no secret of the complexity of the issue.
He said Rome would be an "honest mediator" in discussions but said the task was "very delicate".
France on Wednesday welcomed the US plan, saying it was hoping the G7 finance ministers would reach a deal this week.
"The Americans have made proposals that fall within the framework of international law, and we are going to work on them openly and constructively," Economy Minister Bruno Le Maire said.
- Russian retaliation? -
In April, Moscow sent a thinly veiled warning to Italy in its capacity as G7 chair, taking "temporary" control of the Russian subsidiary of the Italian heating equipment group Ariston in retaliation for what it called "hostile actions" by Washington and its allies.
Experts warn that any further G7 action against Russia could lead to similar reprisals hitting other European companies still operating in the country.
In March, Russia threatened the European Union with legal action "lasting decades" if the proceeds from its frozen assets were used to benefit Ukraine, describing it as "theft".
Kirton noted that tapping just the interest on Russian assets "would considerably reduce the legal problems".
"Legally, it would not be confiscating the 'assets'," he said.
As to further sanctions on Moscow, Yellen said the Stresa meeting would consider "additional action, including to further restrict Russia's access to critical goods to support its military-industrial base", according to extracts of an address due Thursday.
She has also said the G7 will discuss Chinese overproduction of key green technologies, which Washington fears is driving cheap exports and stifling growth elsewhere.
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