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At G7 Italy, Biden to push plans to deal with Russian frozen assets, Chinese overcapacity


White House  — The last time leaders of the world’s seven richest economies met, at the G7 summit in Hiroshima, Japan in 2023, they denounced China’s rising economic security threats and vowed to support Ukraine against Russia’s invasion for as long as it takes.

This week in Apulia, Italy, U.S. President Joe Biden wants the group to restrain the same two adversaries while continuing to tackle common global challenges, including infrastructure funding and AI, or artificial intelligence.

However, a shift to the right of the European political landscape following EU parliamentary elections could complicate his plans.

The U.S. is aiming for the G7 to agree on a united front against Chinese overcapacity, when production of goods exceeds demand, in key green technologies and a mechanism to use Russian frozen assets to aid Ukraine’s war efforts, a source familiar with Biden’s plans told VOA.

On Russia, Biden is pushing a plan to give Kyiv tens of billions of dollars up front, using interest from the approximately $280 billion in Russian assets immobilized in Western financial institutions.

Weeks after announcing new tariffs on Chinese electric vehicles, or EVs, and other strategic industries, Biden also wants leaders to confront Beijing’s practice of flooding global markets with cheap exports in those industries.

Much work still needs to be done on both fronts, and officials are scrambling to agree on a final communique before the summit ends.

Shifting political landscape in Europe

With far-right parties gaining support in the European Parliament elections over the weekend, French President Emmanuel Macron and German Chancellor Olaf Scholz have been weakened, while G7 host Italian Prime Minister Giorgia Meloni consolidated her power.

The European far-right has divergent views on China and Russia, adding another layer of uncertainty to the G7’s posture. A key factor: whether Ursula von der Leyen can keep her job as president of the European Commission for another five years.

“If von der Leyen remains the likely candidate, we can expect continuity on the G7 agenda — she has been forward-leaning on Ukraine and on China,” said Liana Fix, a fellow for Europe at the Council on Foreign Relations.

While von der Leyen is in a strong position, her second term is not guaranteed. Snap French parliamentary elections in late June, as announced by Macron on Sunday following his party’s loss in the parliamentary election, could be the wild card, Fix told VOA. With the prospects of a far-right government, Macron may be hesitant to confirm von der Leyen just a few days before the French elections.

Russian retaliation

Moscow sees the freezing of its assets by Western financial institutions following its 2022 invasion of Ukraine as theft. It has threatened to retaliate, should the G7 agree to adopt the plan pushed by Biden.

The plan will provide Kyiv with a loan of up to $50 billion, which will be paid back to Western allies using interest earned from Russian assets, estimated at $3 billion a year or more until it is paid, or Moscow agrees to pay reparations.

It’s a more aggressive plan than the EU agreed to in May, which would provide Ukraine with the interest income as it is generated annually. It’s also riskier — there’s no guarantee that Russian assets would be immobilized for the duration it takes to repay the loan. Under EU rules, the sanctions regime that freezes the funds must be unanimously renewed every six months by the bloc’s 27 member states.

The push comes as Moscow’s forces gained strategic advances on the battlefield, and amid war funding fatigue settling deeper among American and European taxpayers. A deal will be an important signal of transatlantic unity against Russia ahead of the NATO summit in Washington next month and give a measure of relief as Kyiv faces the prospects of a changing political landscape in the U.S. and Europe.

“This used to be partly about (former president Donald) Trump-proofing support to Ukraine, but may now also be about (Marine) Le Pen-proofing it, considering the possibility of (the far-right) National Rally (political party) winning the French parliamentary election in a few weeks,” said Armida van Rij, director of the Europe program at Chatham House.

The prospects of more populist, Putin-friendly politicians coming to power in Europe may help further galvanize support for Biden’s loan plan for Ukraine, she told VOA.

Concern over Chinese overcapacity

“There is no question that the U.S. and Europe share the concern that China is trying to export its way out of its domestic industrial overcapacity problem,” said Desmond Lachman, a senior fellow at the American Enterprise Institute.

G7 finance ministers have highlighted Beijing’s “comprehensive use of non-market policies and practices” and said they will consider “steps to ensure a level playing field, in line with World Trade Organization principles.”

Just as “Trump’s greater economic nationalism has forced Biden to be more protectionist,” the rise of right-wing European parties could add more urgency to address Chinese overcapacity, Lachman told VOA.

However, it’s unclear if the G7 can agree on how it would do that. EU members that consider China a major export market, particularly Germany and France, are anxious to avoid a trade war.

The European Commission is expected to soon announce planned tariffs on Chinese EVs. The action could prompt retaliation from Beijing, which accuses the West of hyping overcapacity claims to blunt China’s competitive edge.

AI, migration and international development

Italy’s Meloni has made AI a key priority of her G7 presidency and invited Pope Francis to a special session to highlight the Rome Call for AI Ethics. The initiative urges governments and companies to follow the six ethical principles for AI: transparency, inclusion, responsibility, impartiality, reliability, as well as security and privacy.

Leaders will discuss how AI impacts labor, sustainable development, foreign policy, disinformation, and election interference.

A strategic partnership with Africa to curb migration to Europe is another key theme of Meloni’s G7 presidency. In January, she launched the “Mattei Plan,” an international investment initiative to boost development in the continent, in line with the G7’s Partnership for Global Infrastructure and Investment, which is also known as PGI.

PGI was launched at the G7 2021 summit as “Build Back Better World,” echoing the Biden administration’s domestic agenda. The goal is to mobilize $600 billion in private infrastructure funding by 2027 as an alternative to the Chinese Belt and Road initiative that has increased Beijing’s political clout in developing countries.

PGI is now focused on developing economic corridors, including the Lobito Corridor that connects the Democratic Republic of the Congo, Zambia and Angola, and the Luzon Corridor in the Philippines.

Following the U.N. Security Council resolution on a cease-fire between Israel and Hamas, the G7 is also expected to again voice its support for peace talks in Gaza.

The president is scheduled to leave for Italy on Wednesday, the day after his son Hunter Biden was found guilty on federal charges of obtaining a gun in 2018 while allegedly addicted to drugs.