U.S. and Europe Consider Russian Assets to Help Ukraine Amid Depleting Funds
TL/DR –
The Biden administration is discussing with allies the possibility of seizing more than $300 billion in Russian central bank assets in Western nations to support Ukraine’s war effort, as financial support is dwindling. The funds were frozen following the invasion of Ukraine, but seizing them has been deemed legally challenging by Treasury Secretary Janet L. Yellen without congressional approval. Details of the seizure, including whether the money will be directly sent to Ukraine or used in other ways to benefit the country, are still under discussion, and the decision could have significant legal and economic implications, including possible retaliation from Russia.
Biden Administration Considers Using Russian Assets to Aid Ukraine
The Biden administration has started discussing with allies about seizing over $300 billion in Russian central bank assets to support Ukraine’s war effort. The funds are currently situated in Western nations.
The U.S. Treasury Secretary, Janet L. Yellen, had stated that seizing the funds without Congress’ approval would violate U.S. law. Despite this, there’s been a change in stance as there’s increasing congressional support for legislation that would grant the necessary authority.
The assets in question have been out of Russian control for over a year after the Ukraine invasion. The U.S., Europe, and Japan used sanctions to freeze these assets, denying Russia their access. However, permanently seizing the assets would require meticulous legal deliberation.
President Biden has not endorsed the strategy yet, and many details, including the potential usage of the funds, are still under heated debate. There are also discussions around the possible conditions related to the funds, such as restrictions on their use for reconstruction and sustaining Ukraine’s economy.
In a surprising move, German prosecutors seized about $790 million from a Russian financial firm’s Frankfurt bank account that was under E.U. sanctions. This indicates some European nations are ready to confiscate Russian assets.
A large chunk of Russia’s foreign reserves is held in U.S. dollars, both in the United States and in Europe, giving the U.S. the power to immobilize dollar-denominated assets through its sanctions.
There are various suggestions on how to use these frozen assets. Some suggest that they be used as leverage to negotiate a ceasefire with Russia. Other recommendations include seizing the assets and directing them to Ukraine, using the assets’ interest and other profits to benefit Ukraine or using them as collateral for loans to Ukraine.
According to former top Biden administration official Daleep Singh, the immobilized reserves should be placed into an escrow account that Ukraine’s Ministry of Finance could have access to and be used as collateral for new bonds issued by Ukraine.
Robert B. Zoellick, former World Bank president, asserts that as long as the Group of 7 nations act in unity, seizing Russian assets won’t impact their currencies or the status of the dollar.
Despite legal concerns, some argue that the severity of Russia’s actions justify using its assets for compensating Ukraine.
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