Reconsidering Existing Authorities and Seeking Congressional Action
Until recently, Treasury Secretary Janet L. Yellen maintained that seizing the funds was not legally permissible in the United States. Top American officials also expressed concerns about the potential impact on the global financial system. However, the administration, in collaboration with the Group of 7 industrial nations, is reevaluating the possibility of using existing authorities or seeking congressional action to access the funds. Support for legislation granting this authority has been gaining momentum in Congress.
Intensifying Talks and Establishing a Strategy
Talks among finance ministers, central bankers, diplomats, and lawyers have intensified in recent weeks. The Biden administration is pressuring Britain, France, Germany, Italy, Canada, and Japan to devise a strategy by February 24, the second anniversary of the invasion. In response to Russia’s invasion of Ukraine, the United States and its allies imposed sanctions, freezing Russian assets. Now discussions are being held on how these assets can be utilized to support Ukraine’s economic recovery and military efforts.
Exploring Guardrails and Considering Different Approaches
Discussions also focus on establishing guardrails for the funds. Questions arise regarding whether the money should be limited to reconstruction, budgetary purposes, or directly utilized for the military effort. While lawmakers in the United States debated aid to Ukraine tied to immigration issues, the need for alternative sources of funding has become apparent. Current funding for Ukraine is nearly depleted, and there is an urgent requirement for artillery rounds and air defenses. Debates are ongoing regarding direct access to the Russian assets, using them as collateral for loans, or utilizing interest income to support Ukraine.
The Significance and Complexities of Seizing Russian Assets
The sheer magnitude of the funds involved is considered “game-changing” by Philip Zelikow, a former State Department official. Seizing such a large sum of money from another sovereign nation would be unprecedented and could have unpredictable legal and economic consequences. While Germany has signaled readiness to confiscate Russian assets through the actions of its prosecutors, negotiations continue on how to access the bulk of these assets held in Europe.
Potential Strategies and International Law
Western nations have debated using the seized assets directly, transferring them to Ukraine, or utilizing the interest earned for Ukraine’s benefit. An escrow account, proposed by former Biden administration official Daleep Singh, could provide access to immobilized reserves as collateral for new bonds issued by Ukraine. Proponents of seizing Russian assets argue that nations holding these assets are entitled to cancel their obligations to Russia and use the funds to compensate for Russia’s breach of international law. The case of Iraqi funds seized after the invasion of Kuwait serves as a precedent.
Impact on Currencies and Moral Justification
Robert B. Zoellick, former president of the World Bank, argues that if the Group of 7 nations act together, seizing Russian assets would not have a significant impact on their currencies or the status of the dollar. He believes alternative reserve currencies are unlikely to replace the dollar. While Treasury Secretary Yellen previously noted that seizing the assets would not be legal in the United States, she has become more open to the idea in support of aiding Ukraine. As the debate on providing more aid to Ukraine intensifies, the moral questions surrounding Russia’s actions take center stage. In my mind, humanity dictates that those factors outweigh the argument that seizing the assets would be unprecedented simply because Russia’s heinous and unfathomable behavior must be strongly punished.