SAO PAULO, Feb 28 (Reuters) – Brazil’s Finance Minister Fernando Haddad on Wednesday warned of global economic challenges, as G20 finance leaders gathered in Sao Paulo for a meeting overshadowed by deep divisions in the group over the wars in Ukraine and in Gaza.

As finance leaders kicked off their two-day discussions on Wednesday, their host Hadded said the global economic conjuncture was “challenging” and required the G20 to address issues ranging from climate change and poverty.

Brazil’s coordinator of the finance track at the G20, Tatiana Rosito, said negotiations for the economic portion of the group’s communique were successfully completed by finance ministry and central bank deputies in a “very positive” atmosphere.

But German Finance Minister Christian Lindner said his country will only agree on the G20 communique if geopolitical issues such as the war in Ukraine are mentioned.

He also said the G20 finance leaders are discussing financing for Ukraine to raise pressure on Russia, adding that funds could be mobilized for Kyiv by using proceeds from frozen Russian assets.

His remarks highlight challenges the group may face in agreeing on a G20 communique. A draft version, seen by Reuters on Tuesday, had made only a passing reference in their closing statement to regional conflicts due to deep divisions over wars in Gaza and Ukraine.

It was far shorter than previous years, reflecting Brazil’s hope to sidestep controversial geopolitical issues with language mentioning “wars” left in brackets, underscoring a lack of consensus on the matter.

The smaller G7 group of advanced nations also met on Wednesday, where they likely discussed measures to apply pressure on Russia.

U.S. Treasury Secretary Janet Yellen on Tuesday called on allies to move urgently to unlock the value of frozen Russian sovereign assets to help Ukraine, prompting an angry response from Russian officials.

Canada threw its support behind the U.S. idea with Finance Minister Chrystia Freeland saying on Tuesday the two countries agreed on the urgent need to move forward with confiscating frozen Russian sovereign assets to help Ukraine.

Finance officials and central bankers from the G20 are meeting at a time of lingering global economic uncertainties, increasing strains of record debt burdens, and worries that inflation may not yet be tamed.

Another source of tension is Brazil’s push to give developing nations of the Global South more voice in G20 meetings as well as global lenders like the International Monetary Fund and World Bank, where leadership is currently dominated by advanced economies.

(Reporting by Marcela Ayrer and Christian Kraemer; Writing by Leika Kihara; editing by Gabriel Araujo and Chizu Nomiyama)