G-7 leaders to up pressure on Russia, keep eye on assertive China

Group of Seven leaders on Sunday looked set to impose more sanctions on Russia over its war on Ukraine after U.S. President Joe Biden said the group will ban Russian gold imports as their unity and resolve is being tested amid the broader consequences of the prolonged war.

Despite Ukraine taking center stage at a three-day summit from Sunday in the mountain resort of Schloss Elmau, the G-7 also sent a stark reminder that an assertive China will be kept in check, as they launched a global infrastructure initiative that will tap $600 billion by 2027, in a bid to counter Beijing’s “Belt and Road” scheme.

Group of Seven leaders line up for a group photo on the first day of a three-day G-7 summit at Schloss Elmau on June 26, 2022, near Garmisch-Partenkirchen, Germany. (Getty/Kyodo)

The G-7 leaders have enforced powerful sanctions on Russia in strong condemnation of its aggression. The impact of the war, now in its fifth month, is increasingly felt with energy and commodity prices surging and food shortages becoming a pressing issue for some countries.

“We should not ease our sanctions unless the fundamental issue is resolved. That is Russia’s aggression,” Japanese Prime Minister Fumio Kishida told his fellow G-7 leaders.

“G-7 unity is needed, not just in enforcing sanctions but in protecting (the lives of people) from rising prices,” he was quoted by a senior Japanese government official as saying.

The G-7 has already targeted key Russian energy exports such as crude oil and coal despite the pain it may cause resource-thirsty nations in Europe and Japan.

“Together, the G7 will announce that we will ban the import of Russian gold, a major export that rakes in tens of billions of dollars for Russia,” Biden said in his Twitter post.

The potential spillover effects of Russia’s aggression in Ukraine — viewed in West and Japan as a clear violation of international law and a challenge to the existing global order — also keep the G-7 on alert as an assertive China looms large.

The launch of the new infrastructure initiative for low- and middle-income nations comes as China has been criticized for its Belt and Road Initiative which has made some poor nations debt-trapped.

The “Partnership for Global Infrastructure,” as the new initiative is called, is expected to offer a positive alternative to infrastructure models that sell “debt traps,” a U.S. official said.

Japanese Prime Minister Fumio Kishida (C) arrives in Munich on June 26, 2022. He will attend a three-day Group of Seven summit starting later in the day in the mountain resort of Schloss Elmau in southern Germany. (Pool photo) (Kyodo) ==Kyodo

The United States plans to mobilize $200 billion for the initiative over the next five years through grants, federal financing, and leveraging private sector investments, the White House said, with a focus on projects related to clean energy, secure communications technology, health systems and others.

The BRI, advocated by Chinese President Xi Jinping since 2013, is a multibillion-dollar cross-border infrastructure scheme that critics say is intended to draw countries deeper into Beijing’s economic orbit.

Kishida called for G-7 unity in taking a “clear” stance on economic coercion — a phrase apparently directed at China, and shared the importance of ensuring economic security with his fellow leaders, the Japanese official said.

Leaders from Britain, Canada, France, Germany, Italy, Japan, the United States plus the European Union, will spend the next two days exchanging views on energy and food security, climate, and diplomacy — all linked to the Russian aggression.

Piling pressure on Russia to stop its blockade of ports in the Black Sea and allow Ukraine’s exports to leave is a high priority, not only for the war-hit nation but for other parts of the world as it is a major producer.

German Chancellor Olaf Scholz, who is hosting the three-day gathering, is seeking to discuss a recovery plan for Ukraine, while keeping his focus on the priority issue of climate.

Driven by higher energy and commodity prices, accelerating inflation is a common concern for the G-7 leaders because it threatens to choke off the recovery from the fallout of the coronavirus pandemic.

Their central banks, except for the Bank of Japan, have already begun or plan to raise interest rates to rein in inflation at levels not seen in decades. The pace of monetary tightening is in focus, and the G-7 finance chiefs have pledged to “appropriately calibrate” it in a clearly communicated manner, a stance their leaders will likely support.

The Organization for Economic Cooperation and Development now expects the global economy to grow around 3 percent this year, down sharply from its earlier forecast of 4.5 percent.

The G-7 leaders have agreed that unilateral attempts to change the status quo by force should not be allowed, and Ukraine’s sovereignty and territorial integrity should be respected.

Japan is in a unique position as it has a long-unresolved territorial dispute with Russia that has prevented the signing of a post-World War II peace treaty while managing often difficult ties with China, a major trading partner but a growing security concern.

The G-7 aims to address concerns about China’s flexing of its muscles in the Indo-Pacific region and fears that Russia’s behavior may embolden Beijing at a time when tensions remain high with Taiwan, which China aims to reunify with the mainland, by force if necessary.