AUTHOR: TYLER DURDEN
G7 is simply a forum where Europe has a clear majority over the United States. However, geopolitical weaknesses and uncertain political position of Sunak, Scholza and Macrona forced them to submit to the United States lines. Therefore, message After the summit in Italy, he contained a hawk language comparative to China, listing the country 29 times. Group G7 stated that its intention is not to thwart China's development, but "will proceed to take action to defend our companies from unfair practices, equalize opportunities and repair current damage". In addition, the G7 Group supported the agreement proposed by president Biden 3 weeks ago on Israel, which includes ceasefire, hostage exchange and reconstruction of Gaza, but did not condemn Israel for any of its fresh military activities.
The G7 decision to grant a US$50 billion debt to Ukraine, supported by immobilised Russian assets, was the most crucial step forward to this summit.
This structure of loans reflects the typical compromise between the United States and Europe. While a simple solution would include taking over all frozen assets of Russia (estimated at USD 280 billion) in order to straight finance Ukraine's war activities, European countries – especially France, Germany and Belgium – proceed to avoid this, seeing it as besides aggressive and afraid of Russian reciprocity.
Instead, they decided to usage interest on falling assets that are only a fewer billion dollars a year.
The first option would be groundbreaking, while the second option is embarrassingly short.
It is actual that taking possession of the property is not costless.
Concerns about utilizing the Western financial strategy as weapons fuel interest in alternate financial infrastructure and stimulate de-dollarisation initiatives.
However, many times We arguedThat's easier said than done. Another hazard is the failure by the West and Ukraine of any of the means of coercion in future negotiations with Russia, which possibly complicates the resolution of the conflict.
But if anyone thinks Putin's doing it for money, he inactive doesn't understand..
Having said that, Europe's position continued to matter.
Almost all disabled Russian reserves are in the hands of European depositaries, mainly in Belgium.
So the clever compromise is to redirect and decision forward all future interest income from the Russian reserves trapped in these deposits, leaving the capital intact.
Details are inactive being worked out, but the argument is that specified an approach acts as a criminal taxation on extraordinary profits generated from immobilised assets held in Europe.
Consequently, interest on credit will be covered by Russian assets alternatively than by Ukraine. And if Ukraine goes bankrupt, Russia's on the hook.
Despite a debt of USD 50 billion (after US approval of US military aid of USD 60 billion), it may not be a breakthrough.
It is estimated that this fresh backing would only cover about six months of Ukrainian demand.
Although this may aid Ukraine in the forthcoming political changes in Europe and the United States, further backing is likely to be needed from mid-2025.
The anticipation of Trump returning to the office of president increases uncertainty – this is de facto our baseline scenario.
This weekend he again announced that he would immediately end Ukraine's backing by the US. As it was almost a permanent motive throughout the war, the West tends to do what is right only if the alternate is even worse.
Given this risk, the G7 may gotta reconsider this agreement again this year.
