Group of Seven leaders are set to reach a political agreement to provide Ukraine with $50bn of aid using the profits generated by frozen Russian sovereign assets, according to an Elysee official.
Russia’s main exchange said it was halting trading in US dollars and the euro after President Joe Biden’s administration unveiled a raft of measures designed to further impede the Kremlin’s war in Ukraine.
Biden’s administration is expanding the use of secondary sanctions on Russia to curtail the sale of semiconductor chips and other goods to Russia, targeting third-party sellers in China and elsewhere as it looks to further choke off Vladimir Putin’s war machine in Ukraine.
G7 leaders to agree on tapping frozen Russian assets, says France
Group of Seven (G7) leaders are set to reach a political agreement to provide Ukraine with $50-billion of aid using the profits generated by frozen Russian sovereign assets, according to an Elysee official.
However, the technical details of a deal will need to be finalised after a G7 leaders’ summit taking place in Italy this week — meaning that it could be a while for a final agreement to be concluded, said the French official, who spoke on condition of anonymity.
The French view followed comments by the US on Tuesday that leaders had all but reached a political deal. People familiar with the negotiations in both countries said the aim would be to disburse the funds by the end of the year.
G7 participants cautioned that beyond any agreement — which is expected to be one of the main deliverables of the summit — some remaining issues on how it will work are complicated.
Officials on both sides of the Atlantic have for months been discussing how to use the profits generated by the about $280-billion in frozen Russian central bank funds, most of which lies immobilised in Europe.
The proceeds from the frozen assets are estimated to be worth between €3-billion to €5-billion annually. The EU has already agreed to provide Ukraine with the profits twice a year, but the US has been urging G7 allies to find ways to frontload the support to provide Kyiv with more immediate support.
Complex issues that will need to be ironed out include figuring out how to structure any loans to Ukraine, how risks are shared among allies and ensuring that the assets remain frozen for years.
Moscow exchange halts dollar, euro trading on new US sanctions
Russia’s main exchange said it was halting trading in US dollars and the euro after President Joe Biden’s administration unveiled a raft of measures designed to further impede the Kremlin’s war in Ukraine.
From 13 June, the Moscow Exchange won’t carry out trading on foreign currency, precious metals, stock, money and futures markets in instruments with settlement in dollars and the European single currency. The company, known as Moex, was targeted along with the country’s main settlement depository, by US restrictions announced on Wednesday.
Russia’s authorities have sought to move away from the dollar and euro, branding them “toxic” amid sanctions over President Vladimir Putin’s campaign against Ukraine. The share of the yuan in trading has increased, while officials have pursued measures to discourage businesses and people from using the currencies of nations that imposed restrictions.
Transactions with the dollar and euro will still be available on the over-the-counter market, the central bank said in a statement. The monetary authority said it would use bank and over-the-counter data to set the rouble’s exchange rates to those currencies.
US expands Russia sanctions to target LNG projects, chips
Biden’s administration is expanding the use of secondary sanctions on Russia to curtail the sale of semiconductor chips and other goods to Russia, targeting third-party sellers in China and elsewhere as it looks to further choke off Putin’s war machine in Ukraine.
The new measures include all Russian companies, people and entities that have been previously sanctioned, including banks Sberbank and VTB, increasing the risk to third-country financial institutions or companies that do business in the Russian economy. The measures also include sanctions on new Russian natural gas projects and Russia’s main stock exchange, the Moex, as well as the National Clearing Center and the country’s main settlement depository.
“We are increasing the risk for financial institutions dealing with Russia’s war economy and eliminating paths for evasion, and diminishing Russia’s ability to benefit from access to foreign technology, equipment, software, and IT services,” Treasury Secretary Janet Yellen said. “Every day, Russia continues to mortgage its future to sustain its unjust war of choice against Ukraine.”
On the energy front, new measures target Russia’s planned liquefied natural gas projects, including Obsky, Arctic LNG 1, Arctic LNG 3 and Murmansk LNG. The measures also target seven LNG tankers at Russian shipyard Zvezda, including three vessels for an Arctic LNG 2 project hit by an earlier round of sanctions that prevented the start of exports from Russia’s newest LNG export plant.
New sanctions also target RusGazDobycha, which is Gazprom’s partner in a project to produce liquefied natural gas and other products at Ust-Luga on the Baltic Sea, and insurer Sogaz. General licences permitting trade in agriculture, medicine and other forms of energy, including oil, remain in effect.
Chips are another key target of the expanded sanctions. Russia is still managing to source chips from third-party countries for use in missiles and other inputs critical to the battlefield despite a push to curb Moscow’s access to technologies supporting its war effort. To counter this, the administration is broadening the scope of existing export controls and restrictions to target US-branded goods even if they’re not made domestically.
“These actions heighten the risk for financial institutions dealing with Russia’s war economy, close down avenues for evasion, while diminishing Russia’s ability to benefit from access to foreign technology, equipment, software and IT services,” National Security Adviser Jake Sullivan told reporters on Wednesday.
The move comes as Biden prepares to join Group of Seven leaders for a summit in Italy, where one of their top concerns will be securing new ways to bolster aid to Ukraine and further constrain Russia. Biden will meet on Thursday with Ukrainian President Volodymyr Zelensky.
Germany unveils plan to plug yawning shortage in troop numbers
Germany presented proposals to help address a shortage of armed forces personnel that relies on recruits volunteering for service, part of a drive to expand the military triggered by Russia’s war on Ukraine.
Defence Minister Boris Pistorius had suggested attempting to plug the shortfall of regular troops of around 20,000 with a reintroduction of some form of conscription. Chancellor Olaf Scholz was among senior figures in the government to push back, saying its abolition in 2011 shouldn’t be reversed, even with an increased threat of Kremlin aggression.
“The threat situation is a completely different one compared with a few years ago,” Pistorius said on Wednesday at a news conference in Berlin.
Putin had unleashed a massive increase in defence spending and was effectively operating a war economy, while verbal attacks on Nato members were increasing, Pistorius added.
“We must assume that Russia will be able from 2029 onwards to attack a Nato member or a neighbour,” he said.
The proposed model would oblige young men to fill out a questionnaire about their health and basic motivation — completing the form would be voluntary for young women. A number of respondents would then be asked to volunteer for a basic training of six months with an option to extend that by 17 months.
That would enable the armed forces, or Bundeswehr, to recruit an additional 5,000 troops per year, on top of the 10,000 volunteers currently, according to a paper distributed by the defence ministry.
The Bundeswehr has long suffered from a shortfall in personnel and last year shrank to about 180,000 regular troops despite sustained efforts to attract volunteers.
To fulfil its obligations as a member of Nato, Germany will need a total of about 460,000 personnel, the ministry estimates. Of those, around 200,000 would be active troops and the rest reserves.
Germany abolished compulsory military or civil service for men in 2011 under former Chancellor Angela Merkel, though German law still provides for possible conscription in the event of war or other conflict.
US set to send second Patriot missile battery to Ukraine
The US will send a second Patriot missile battery to Ukraine, people familiar with the matter said, after Zelensky appealed for more of the powerful air defence systems to protect against Russian attacks.
The people asked not to be identified discussing private deliberations, and a spokesperson for the Pentagon declined to comment. White House National Security Adviser Jake Sullivan declined to confirm the plans — first reported by The New York Times — in a briefing with reporters, but added that “it has been a top priority of President Biden to get more air defence systems to Ukraine”.
Zelensky has repeatedly urged allies to send more Patriots, along with other air defence systems, as Russia has stepped up its air attacks. But the Patriot, which costs about $1-billion, is in high demand around the world, and the US and other nations that deploy the system say they have few to spare.
The US announced in 2022 it was sending one Patriot battery, and has kept up a steady shipment of missiles to supply what’s believed to be two other systems in the country. Germany committed last month to send another Patriot system.
G7 to call on China to stop helping Russia’s war in Ukraine
Group of Seven leaders will call on China to stop enabling and sustaining Russia’s war against Ukraine, according to a draft statement seen by Bloomberg.
Kyiv’s allies are accusing Beijing of providing Russia with technologies and parts — either found in weapons or necessary to build them — aiding Moscow’s efforts to get around wave after wave of G7 trade restrictions on many of those goods. Banned materials often get to Russia through third countries such as China and Turkey or networks of intermediaries.
“China’s ongoing support for Russia’s defence industrial base has significant and broad-based security implications,” says the draft statement, which could still change before it’s agreed by leaders at a summit in Italy due to start on Thursday.
A spokesperson with the Chinese Ministry of Foreign Affairs responded to the draft to say that China did not create the Ukraine crisis nor was it party to the conflict.
“G7 should take pragmatic responsibility to promote the easing of the situation and create conditions to solve the political crisis, rather than making groundless accusations towards a non-party to the conflict,” the spokesperson said in a statement to Bloomberg. DM