Finance ministers from the Group of 7 nations pledged on Thursday to continue providing economic support for Ukraine and backed a plan that would help finance the nation’s reconstruction with proceeds from Russian assets that have been frozen by Western nations.
In a joint statement, or communiqué, finance officials also condemned Hamas for its attack this week on Israel — a statement that came after a lengthy debate about including language condemning the Israel-Gaza war.
“We unequivocally condemn the recent terror attacks by Hamas on the State of Israel and express our solidarity with the Israeli people,” they wrote.
The agreement to explore the use of Russian funds to help pay for Ukraine’s reconstruction followed months of discussions among the world’s most advanced economies, who have jointly frozen about $300 billion of Russian central bank assets. The finance ministers expressed support for a plan that would use investment gains on those assets, without taking the legally questionable step of using the underlying assets themselves.
Treasury Secretary Janet L. Yellen expressed support for the plan, which would use what she described as “windfall proceeds” from Russian sovereign assets immobilized in particular clearinghouses and use the funds to support Ukraine.
“We reiterate our unwavering support for Ukraine and are united in our condemnation of Russia’s illegal, unjustifiable and unprovoked war of aggression against Ukraine,” they wrote.
The world’s top economic policymakers have assembled in Morocco this week for the annual meetings of the International Monetary Fund and the World Bank, a gathering that has been overshadowed by geopolitical crises that are inflicting steep humanitarian and economic costs.
Before the attack on Israel, the meeting was expected to focus on continuing to punish Russia for its war in Ukraine. On Thursday morning, the Group of 7 pledged to be tougher in enforcing measures it had taken to pressure Russia’s economy, saying it was “committed to countering any attempts to evade and undermine our sanction measures.”
As part of that toughened approach, the United States imposed sanctions on two shipping companies on Thursday for violating the oil price cap that the Group of 7 nations enacted to starve Russia of energy export revenue. It was the first such penalties leveled amid growing concerns that the policy had been diminished by evasion and loopholes.
The sanctions were announced at a time of renewed anxiety about global energy prices following the attack by Hamas on Israel over the weekend that threatens to become a regional conflict. The price cap was put in place late last year to prevent Russia from benefiting from soaring energy prices by limiting its ability to sell oil using Western insurance and financing.
The cap was set so that Russian oil could not be sold for more than $60 per barrel if using those services. It was designed to ensure that Russian oil continued to flow but at a deep discount, to starve Moscow of revenue needed to fund its war.
The Treasury Department imposed sanctions on Lumber Marine, a United Arab Emirates shipping company, for transporting crude oil priced above $75 per barrel from a Russian port after the cap was put in place. It also imposed sanctions on Ice Pearl Navigation Corporation, a Turkish shipping company, for transporting Russian crude oil priced above $80 per barrel.
Being added to the U.S. sanctions list could interfere with both companies’ ability to participate in the global oil trade.
“Today’s action demonstrates our continued commitment to reduce Russia’s resources for its war against Ukraine and to enforce the price cap,” Wally Adeyemo, the deputy Treasury secretary, said in a statement.
The announcement was described as a new phase of price cap enforcement, albeit a small step considering how much evasion many energy analysts suspect is taking place.
“The administration’s action today enforcing the Russia oil price cap was limited, but a start,” said Daniel Tannebaum, a partner at Oliver Wyman who advises banks on sanctions. “I do think the Biden team is very carefully calibrating a response to ensure they don’t inadvertently spook prices on the oil market.”
The Group of 7 has been closely watching how the oil markets have responded to the price cap. The group has largely considered it successful because oil prices have not surged and, officials believe, Russian oil profits have been eroded because the Kremlin has had to invest in a “shadow” fleet of ships and alternative financial service providers.
U.S. officials have been warning shipping companies about potential violations.
“We’re not going to tolerate evasion and we’re looking very closely at that,” Ms. Yellen told The New York Times in an interview this week. “To the extent that there’s evasion, we certainly need to take action to deal with that and you should expect us to do so.”
Finance ministers and central bankers at the meeting were consumed by concerns that multiple crises would derail their efforts to combat inflation while avoiding recessions.
“The world economy has entered into troubled times,” Bruno Le Maire, France’s finance minister, said on the sidelines of the meetings on Thursday. “Geopolitical risks are the most significant risks for the world economy.”
