The G7 summit discussed the possibility of unfreezing Russian assets to support Ukraine's reconstruction, but no specific implementation plans were agreed upon.
The EU proposed utilizing the proceeds from Russian asset management, while the US suggested issuing bonds secured by frozen assets to explore ways to secure funds for Ukraine's support.
The G7 is expected to continue discussing Ukraine support measures at the June summit, potentially adopting the EU proposal or a compromise between the EU and US plans to aid Ukraine's reconstruction.
The G7 summit held in Stresa, Italy, from May 23 to 25, 2024, saw heated discussions regarding the potential release of frozen Russian assets related to Russia's invasion of Ukraine. G7 members explored ways to utilize the frozen Russian assets for Ukraine's reconstruction, but they failed to reach a consensus on the specific implementation methods.
The European Union (EU) independently developed its own plan just before the meeting. With frozen Russian assets within EU member states accounting for two-thirds of the total frozen assets, the EU decided to utilize only the investment income generated from these assets instead of the assets themselves. This approach is expected to generate around €3 billion (approximately ₩5 trillion) annually.
However, it is estimated that rebuilding Ukraine from the damages caused by the Russian invasion will require $486 billion (approximately ₩62 trillion) over the next 10 years, making the investment income from frozen assets woefully insufficient.
In response, the United States proposed issuing bonds or borrowing money using the future interest on the frozen assets as collateral. Given that the total amount of Russian assets frozen by the West amounts to $300 billion (approximately ₩380 trillion), this method could potentially increase the funding for Ukraine's support to the level of $50 billion.
However, implementing this plan would necessitate the freezing of Russian assets for a considerable period, raising concerns about potential violations of international law, particularly regarding issues of ownership. It could also lead to a decrease in foreign exchange reserves in some countries, negatively impacting international capital flows.
The G7 joint statement welcomed the EU's decision while agreeing to continue discussions to present various options for supporting Ukraine at the G7 summit scheduled for June. Ultimately, the EU's proposal is likely to serve as the foundation, or a compromise between the EU and US plans may be reached. Regardless, Japan's role in these discussions is expected to be minimal, given the relatively small size of the Russian assets it has frozen.
Meanwhile, Russia faced severe economic sanctions following its invasion of Ukraine, leading to robust asset freezing measures. According to the Japanese government, approximately ₩3.8 trillion worth of Russian Central Bank's assets held in Japan, in Japanese Yen, are currently frozen.
The frozen assets are restricted from being freely disposed of by the Russian Central Bank, preventing them from being utilized or withdrawn from the market. This represents an economic sanction by the international community aimed at hindering Russia's ability to secure funds for its invasion of Ukraine.
As the value of the Russian ruble plummeted due to the sanctions, the Russian Central Bank responded by significantly raising its key interest rate from 9.5% to 20% in an attempt to defend the ruble. They have also implemented drastic measures such as mandating foreign currency sales by export companies, but experts believe that the sanctions are having a substantial impact.
With the Russian economy suffering a severe blow due to the economic sanctions, international support for Ukraine's reconstruction is expected to continue. Ukraine's reconstruction should not be viewed solely as restoring damaged buildings and infrastructure but also as a long-term investment in its future, encompassing green energy transitions, digital innovation, and the establishment of an inclusive economy.
While the G7 summit did not fully develop a comprehensive plan for supporting Ukraine's reconstruction, it is hoped that the international community will continue to explore solutions and work together. This will serve as a solid foundation for ending Russia's unwarranted invasion and building a peaceful world.