U.S., Europe eye Russian assets to assist Ukraine as funding evaporates
The Biden administration is quietly signaling new support for seizing more than $300 billion in Russian central bank assets stashed in Western nations and has begun urgent discussions with allies about using the funds to aid Ukraine’s war effort at a moment when financial support is waning, according to senior American and European officials.
Until recently, Treasury Secretary Janet Yellen had argued that without action by Congress, seizing the funds was “not something that is legally permissible in the United States.” There has also been concern among some top U.S. officials that nations around the world would hesitate to keep their funds at the New York Federal Reserve, or in dollars, if the United States established a precedent for seizing the money.
But the administration, in coordination with the Group of 7 industrial nations, has begun taking another look at whether it can use its existing authorities or if it should seek congressional action to use the funds. Support for such legislation has been building in Congress, giving the Biden administration optimism that it could be granted the necessary authority.
The talks among finance ministers, central bankers, diplomats and lawyers have intensified in recent weeks, officials said, with the Biden administration pressing Britain, France, Germany, Italy, Canada and Japan to come up with a strategy by Feb. 24, the second anniversary of the invasion.
The more than $300 billion of Russian assets under discussion have already been out of Moscow’s control for more than a year. After the invasion of Ukraine, the United States, along with Europe and Japan, used sanctions to freeze the assets, denying Russia access to its international reserves.
But seizing the assets would take matters a significant step further and require careful legal consideration.
President Joe Biden has not yet signed off on the strategy, and many of the details remain under heated discussion. Policymakers must determine if the money will be channeled directly to Ukraine or used to its benefit in other ways.
They are also discussing what kinds of guardrails might be associated with the funds, such as whether the money could be used only for reconstruction and budgetary purposes to support Ukraine’s economy, or whether — like the funds Congress is debating — it could be spent directly on the military effort.
The discussions havetaken on greater urgency since Congress failed to reach a deal to provide military aid before the end of the year. On Tuesday, lawmakers abandoned a lastditch effort amid a stalemate over Republicans’ demands that any aid be tied to a crackdown on migration across the U.S. border with Mexico.
The Financial Times reported earlier that the Biden administration had come around to the view that seizing Russia’s assets was viable under international law.
A senior administration official said this week that even if Congress ultimately reached a deal to pay for more arms for Ukraine and aid to its government, eroding support for the war effort among Republicans and Ukraine’s increasingly precarious military position made it clear that an alternative source of funding was desperately needed.
U.S. officials have said that current funding for the Ukrainians is nearly exhausted, and they are scrambling to find ways to provide artillery rounds and air defenses for the country. With Europe’s own promise of fresh funds also stuck, a variety of new ideas are being debated about how to use the Russian assets, either dipping into them directly, using them to guarantee loans or using the interest income they earn to help Ukraine.
“This amount of money that we’re talking about here is simply game-changing,” said Philip Zelikow, a State Department official in both Bush administrations and a senior fellow at Stanford University’s Hoover Institution. “The fight over this money which is occurring is actually in some ways the essential campaign of the war.”
Seizing such a large sum of money from another sovereign nation would be without precedent, and such an action could have unpredictable legal ramifications and economic consequences. It would almost certainly lead to lawsuits and retaliation from Russia.
Ukraine’s president, Volodymyr Zelenskyy, referred to the discussions in a video address to his country last week, saying that “the issue of frozen assets was one of the very important decisions addressed” during his recent talks in Washington. He seemed to suggest that the funds should be directed to arms purchases, adding, “The assets of the terrorist state and its affiliates should be used to support Ukraine, to protect lives and people from Russian terror.”
In a sign that some European countries are ready to move forward with confiscating Russian assets, German prosecutors this week seized about $790 million from the Frankfurt bank account of a Russian financial firm that was under European Union sanctions.