Samuel Cestari: Hello, everybody, and welcome to the CSIS press briefing previewing the upcoming G-7 summit that’s to be held in Italy from June 13th to the 15th. We’re pleased to have several of our experts ranging various programs on the call today to share their perspectives and expertise as it relates to the summit and the issues likely to be addressed there.
Just a couple of housekeeping notes before we get started. Each of our experts will offer several minutes of introductory remarks after which we’ll turn to your questions. We’ll also be distributing a transcript of today’s call to all participants in the next few hours. This transcript will also be made available on CSIS.org later today.
So with that, why don’t we go ahead and get started? I’ll turn first to Max Bergmann, director of the CSIS Europe, Russia, and Eurasia Program and Stuart Center. Max, over to you.
Max Bergmann: Great. Well, thank you, Sam. Thanks all for joining us.
I’m going to start – so I focus on Europe and Russia, and focus on the G-7 conversation about utilizing – I wouldn’t say seizing – but utilizing the profits on frozen Russian assets for Ukraine. And this, I think, is a very important initiative being pushed by the United States. And the central idea is that right now, especially in Europe, there’s about 200 billion (dollars) or so assets – Russian assets that are frozen at this European financial institution in Belgium called Euroclear. And those generate profits, right? Those are sitting in a bank account accruing interest. And that’s roughly – at least more than two billion (dollars) a year.
And so the U.S. idea is to basically take the profits from those assets, and seize those profits, and then go to a bank and say, OK, give us about a $50 billion loan, and then that money could be used for Ukraine. So that’s a bit like if you’re going to buy a house and the house cost a million dollars, maybe, you know, you’re putting 100,000 or 200,000 (dollars) down. So the downpayment effectively, and then the interest payments, enable you to pay back the loan. I think it’s a really novel, interesting idea. The major purpose of this is that there’s a desperation for how to get Ukraine either – both how to get Ukraine money, and then also to ramp up defense industrial production for Ukraine to provide Ukraine additional security assistance.
However, I will say that there’s a number of complications with this proposal. Number one is that the Europeans have already agreed at the European Council to take the two to three billion (dollars) in profits, and just seize that, and then spend that on weapons. So to not leverage that for a loan. The other question becomes once those assets get seized, or you get the loan, where does the loan go to? Does it go to Ukraine, which I think is what the plan is? And then does Ukraine – does it just go into their government budget? If so, then is that going to go to buying weapons? And if so, who’s weapons? European weapons? U.S. defense companies? And then there’s a lot of legal complications, right? So in the EU – this is within the EU, yet, it’s a Belgian financial institution so Belgium would likely have to take action to do this and then how would – who would back the loan. There’s – so a lot of complications. But this is all workable.
I think the major problem, though, that we see is that this is being driven or discussed by European finance ministers – (inaudible, technical difficulties) – in particular Germany’s Christian Lindner, who is causing all sorts of problems inside of the German coalition that is trying to push for more German defense spending, and in the German – he comes from a very fiscally conservative party that is part of the coalition, yet, opposed to any sort of debt spending, opposed to basically borrowing at the EU level at all.
So this would sort of go against a major political concern. There’s also other concerns about European – amongst European finance ministers that they will be left holding the bag if Ukraine defaults on the loan or that the EU take the most risk.
I think all of these concerns are rather bogus in the sense that European rhetoric, at least from the defense minister side – those that will be appearing at the NATO summit and the prime ministers – is very bullish on Ukraine and so I think this is a workable way forward. I think it’s rather complicated.
What we have proposed at CSIS, and this is what is also being pushed by the Estonians and being discussed by the European level, is that EU could also just borrow money as it did in response to COVID and I think that almost makes a cleaner solution.
But in some ways the EU should do both. It should both borrow money, invest it in weaponry, but also they could seize these – the profits from these assets and use them to, I think, back up Ukraine’s fiscal reserves.
And with that, maybe I’ll stop there and turn it over to my colleagues.
Mr. Cestari: Thank you, Max.
So next we have Caitlin Welsh, director of the CSIS global food and water security program.
Caitlin, over to you.
Caitlin Welsh: Thanks, Sam.
Hi, everybody. I’m Caitlin Welsh, director of the CSIS global food and water security program, and before joining CSIS I covered the G-7 at the State Department and at the National Security Council for 10 years. At the NSC I was G-7/G-20 director from 2018 to 2020, and I’m going to address two brief topics now and I’ll have to jump after that. But if anybody has questions please feel free to reach out to Sam and to me.
So I’ll start first with a quick note on Italy’s recent G-7 history. My colleagues will lay out the importance of the G-7 summit to Italy and Italian domestic politics. But this G-7 summit and each of Italy’s last G-7 summits have also been particularly important to the United States as well.
Italy’s last G-7 summit in 2017 was President Trump’s first G-7 summit and his first exposure to the G-7. Italy’s summit before then, the 2009 G-8 summit, was President Obama’s first G-8 summit and his first entree to the G-8 stage. During an election year this 2024 G-7 summit takes on additional importance for President Biden, of course.
