G7 agrees on loan deal to support Ukraine with Russian assets

BORGO EGNAZIA, Italy — Leaders of the Group of Seven major democracies agreed on an outline deal on Thursday to provide $50 billion of loans for Ukraine using interest from Russian sovereign assets frozen after Moscow invaded its neighbour in 2022.

The political agreement was the centrepiece of the opening day in southern Italy of the annual summit of G7 leaders, attended for a second successive year by Ukrainian President Volodymyr Zelenskiy.

He signed a new, long-term security accord with U.S. President Joe Biden after signing a 10-year security accord with Japan, with Tokyo promising to provide Kyiv with $4.5 billion this year — underlining continued strong backing from the West.

Calling the frozen asset agreement a “significant outcome”, Biden told reporters it was “another reminder to (Russian President Vladimir) Putin that we’re not backing down.”

The G7 plan for Ukraine is based on a multi-year loan using profits from some $300 billion of impounded Russian funds, the bulk of which are blocked in the European Union.

The technical details will be finalised in the coming weeks, with the new cash expected to reach Kyiv by the end of this year thanks to contributions from all G7 states — the United States, Canada, Britain, France, Germany, Japan and Italy.

“This is a very clear commitment that should embolden the Ukrainians to do what they need to to defend their independence and sovereignty,” said German Chancellor Olaf Scholz.

The aim of the deal is to ensure it can run for years regardless of who is in power in each G7 state – a nod to concerns that U.S. Republican presidential candidate Donald Trump may be much less sympathetic to Kyiv if he beats Biden in November’s election, according to a person close to the talks.

Russia regards attempts by the West to take income from its frozen assets as criminal, foreign ministry spokeswoman Maria Zakharova said on Thursday, adding that Moscow’s response would be very painful for the European Union.

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STRUGGLES AT HOME

Many of the G7 leaders are struggling at home but looked to project confidence on the world stage as they confront an array of problems, including China’s economic ambitions, the growth of artificial intelligence and turmoil in the Middle East.

The leaders expressed their concerns about the situation on the Israel-Lebanon border and endorsed U.S. efforts to secure a ceasefire in the Gaza war, according to a draft communique due to be released following the summit.

In addition, they called on Israel to refrain from a full-scale offensive in the southern Gaza city of Rafah, “in line with their obligations under international law”.

Western nations are also expected to voice both unanimous concern over China’s industrial overcapacity, which they say is distorting global markets, and their determination to help African states develop their economies, diplomats said.

The G7 may have a very different complexion next year.

Biden faces an uphill battle to win re-election in November, British Prime Minister Rishi Sunak looks certain to lose power in a national election next month, while French President Emmanuel Macron dissolved his country’s parliament on Sunday after his party was trounced in the European vote.

All smiled broadly as they greeted Italian Prime Minister Giorgia Meloni under a blazing Mediterranean sun at the entrance to the Borgo Egnazia resort where the summit is being held.

However, the display of unity was undermined late in the day, when Macron clashed with the anti-abortion Meloni over a push by Italy to remove any direct reference to abortion rights in the final communique.

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CHINA TO DOMINATE TALKS TODAY

Group of Seven (G7) leaders hold a final day of talks at their annual summit today, with China topping the agenda before Pope Francis puts in a historic appearance to discuss artificial intelligence (AI).

The pope will be joined by 10 other heads of state and government, including the prime minister of India and the king of Jordan, as the G7 throws open its doors to outsiders to show it isn’t an aloof, exclusive club.

During the first day of their meeting in southern Italy, the G7 nations agreed on a deal to provide $50 billion of loans for Ukraine backed by interest from frozen Russian assets – hailing the accord as a powerful signal of Western resolve.

Although many details still need to be worked out, G7 members – the United States, Canada, Japan, Germany, France, Italy and Britain – and the European Union (EU) are expected to contribute to the loan, with cash to reach Kyiv by the end of the year.

“This is a very historic step we’re taking today,” said German Chancellor Olaf Scholz.

“It is also a clear signal to the Russian President (Vladimir Putin), that he can’t just sit this out and hope that fiscal problems in a country that backs Ukraine will one day let him win this war,” he added.

While Ukraine dominated the first day of talks, China will be the key issue this morning.

Leaders are expected to voice concern about China’s excess industrial capacity and its support for Russia.

The U.S. this week imposed fresh sanctions on China-based firms supplying semiconductors to Russia, amid worries over Beijing’s increasingly aggressive stance against Taiwan and run-ins with the Philippines over rival maritime claims.

“China is not supplying weapons (to Russia) but the ability to produce those weapons and the technology available to do it, so it is in fact helping Russia,” U.S. President Joe Biden told reporters at the summit after signing a bilateral security pact with Ukrainian President Volodymyr Zelenskiy.

On Tuesday, the EU announced it would impose extra duties of up to 38.1% on imported Chinese electric cars from July, risking retaliation from Beijing, which vowed to take measures to safeguard its interests.

However, there are differences within the G7 over how to counter Chinese state subsidies, with Europe anxious to avoid an all-out trade war with Beijing.

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PAPAL AUDIENCE

Besides his speech on AI, the Pope will hold multiple bilateral meetings, including with Biden, Zelenskiy and Turkish President Tayyip Erdogan.

“It is a historic day. We will welcome the Holy Father. It is the first time for a pontiff at a G7. I am proud it will happen under the Italian presidency,” Italian Prime Minister Giorgia Meloni told reporters on Thursday.

Leaders will also discuss immigration, a crucial issue for Meloni who is pushing Europe to help her curb illegal flows from Africa and has launched a flagship plan to boost development in the continent to tackle the root cause of the departures.

Many of the leaders will leave Italy late today, including Biden, and Meloni said they had already agreed on the summit’s conclusions, to be approved at the end of the day.

On Saturday, there will be room for bilateral meetings for those staying on, ahead of a final news conference from Meloni.