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WASHINGTON (AP) — It’s been nearly two years since the United States and its allies retaliated by freezing hundreds of billions of dollars in Russian foreign holdings. Moscow’s invasion of Ukraine, About $300 billion of Russian Central Bank money remains unused as the war continues, while officials in several countries debate the legality of sending money to Ukraine.
The idea of using Russia’s frozen assets is gaining new traction recently as continued allied funding for Ukraine becomes more uncertain and the US Congress remains at an impasse over providing more support. But there are some compromises because the weaponization of global finance could damage the US dollar’s position as the world’s leading currency.
Ukrainian President at the World Economic Forum meeting in Davos, Switzerland this week Volodymyr Zelensky It called for a “strong” decision to direct assets frozen in Western banks this year “to the defense against the Russian war and to the reconstruction of Ukraine.”
“What Putin likes most is money,” he said. “The more billions he and his oligarchs, friends and allies lose, the more likely he will regret starting this war.”
Biden administration officials, who previously dismissed the idea as legally burdensome, are now showing openness to the idea.
Penny Pritzker, US special representative for Ukraine’s economic recovery, said at the Davos forum that the US and the Group of Seven allies are still looking for an adequate legal framework to move the plan forward.
“Inspire all the lawyers, all the different governments and all the parties to come together to solve this case,” he said. “It’s hard, it’s complicated, it’s tough, and we need to keep working.”
Administration officials have cautioned that even if a legal way is found to transfer the frozen dollars to Ukraine, the war-torn nation has an urgent need for funds that must be met in other ways since U.S. aid to Ukraine’s military . Has stopped.
Bipartisan legislation passed in Washington is called Rebuilding Economic Prosperity and Opportunity for Ukrainians Act Ukraine will use assets seized from the Russian Central Bank and other sovereign assets.
A senior official, who spoke on condition of anonymity to share internal discussions, said the administration generally supports the legislation to give the U.S. more flexibility to ensure that Russia is compensated for the harms it caused. and is in “active dialogue” with colleagues about how best to do so. to do that.
But even if the law is enacted, sanctions expert Nicholas Mulder of Cornell University warned that freezing frozen assets could have the unintended effect of undermining efforts to secure long-term financing for Ukraine.
“Right now it is being pushed by Washington as a substitute for, rather than as a complement to, long-term Western support for Ukraine,” he said. “If the property is transferred, this amount will also be exhausted sooner or later. But by that time Western leaders will have stopped making any political case for supporting Ukraine, and it will be very difficult to regain support.
At the beginning of Russia’s invasion the US announced that the US and its allies had blocked access to more than $600 billion held by Russia outside its borders – including approximately $300 billion of funds belonging to the Central Bank of Russia. also includes. Since then, the US and its allies have continued to impose targeted sanctions against companies and wealthy oligarchs with ties to Russian President Vladimir Putin.
World Bank’s latest damage assessment A Ukraine report released in March 2023 estimates that the nation’s reconstruction and recovery will cost $411 billion over the next 10 years, including public and private funding needs.
Since the war began in February 2022, the United States has given About $111 billion in arms, equipment, humanitarian aid provided to Ukraine and other assistance. Other countries have also provided substantial aid to Ukraine – Britain announced a $3 billion aid package on Friday.
At the White House, Office of Management and Budget Director Shalanda Young told a group of reporters this month that although the possibility of freezing Russian assets was being studied, it would not have an immediate impact on Ukraine’s financial needs.
“This does not eliminate the need to provide funding now,” Young said. “I think this is a future benefit for Kyiv, we should look at it and take it seriously.”
Sergei Aleksashenko, a former Russian central banker who is now a member of Anti-Russian Committee Along with other dissidents, he said that while he firmly believes that Russia should be forced to pay compensation to Ukraine, “I do not believe that there is any way to seize the assets of the Russian Central Bank without a court decision on the case.” Is.”
“Because if there is no legal basis for seizing Russian assets, and if it is done by decision of the administration, that means there is no rule of law in the US and no protection of private property.”
He said an administrative decision to freeze Russia’s assets could lead countries like China – the largest holder of US Treasuries – to determine that it is not safe to keep their reserves denominated in US dollars.
Some efforts are underway, under limited circumstances, to seize Russian wealth and sanctioned oligarchs. Last May, the Justice Department announced it had transferred $5.4 million seized from Russian tycoon Konstantin Malofeyev to the State Department’s fund for the reconstruction of Ukraine.
And in December, Germany’s federal prosecutor filed a petition for confiscation of property In relation to the deposit of more than 720 million euros ($789 million) into a Frankfurt bank account by a Russian financial institution in a suspected attempt to violate sanctions regulations.
Belgium, which holds the rotating presidency of the EU bloc for the next six months, is now leading talks about freezing Russia’s assets. Belgium is also the country where the most seized Russian assets are being held under sanctions.
The country is collecting tax on properties. Belgian Prime Minister Alexander De Croo said in October that 1.7 billion euros ($1.8 billion) in tax collections were already available and that the money would be used to buy military equipment, humanitarian aid and help rebuild the war-torn country. Will go.
But EU countries worry that going ahead with asset freezes could open the door to serious legal problems and destabilize the financial system.
De Croo said he was hearing “a lot of discretion” when the issue of asset freezes was raised this week.
“It is important that we stay within the legal framework,” he said.
Maria Snegovaya, a senior fellow at the Center for Strategic and International Studies, cautioned that if Ukraine’s immediate needs were not met, “unfortunately no amount of seized Russian assets will be able to compensate for that.”
“And by then it’s going to be overwhelming.”
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Associated Press writers Ellen Knickmeyer, Lisa Mascaro, Seung Min Kim, Zeke Miller and Amer Madani in Washington and Sam Petrequin in Brussels and Jamie Keaton in Davos contributed to this report.
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