The United States this week accepted a package of foreign financial aid to Ukraine and Israel after protracted negotiations. The package included the so-called REPO Act (Restoration of Economic Prosperity and Opportunity for Ukrainians), which allows Joe Biden’s administration to seize Russian state assets located in the US and use them to benefit Kyiv.
The new US law requires the president and the Treasury Department to begin a search for Russian assets in the US within 90 days and to report to Congress within 180 days. One month after that deadline, the president will be able to “seize, confiscate, transfer or entrust” any Russian state property, including any interest.
This could mean an additional $5 billion in aid to Ukraine, which could come from Russian central bank assets that have been frozen in the United States. The US and Western allies immediately froze $300 billion in Russian foreign assets at the start of Russia’s invasion of Ukraine. Most of this money is located in the countries of the European Union and remains unused. Roughly $5 billion of these assets are located in the US.
The problem is that although the frozen assets are immobilized and cannot be accessed by Moscow, they still belong to Russia. While governments can generally freeze assets without problems, seizing those assets and using them to benefit Ukraine, for example, could violate international law. The United States wants to discuss this possibility with its allies and proceed together.
Biden’s national security adviser, Jake Sullivan, said Wednesday that the issue will be an important topic at the G7 leaders’ meeting in Italy in June. “It would be ideal if we proceed together,” Sullivan said, according to APNews.
The legislation specifically states that “any efforts by the United States to confiscate and reuse Russian state assets” should be carried out together with international allies, including the G7, the 27-member European Union and other countries in a coordinated effort.
Treasury Secretary Janet Yellen confirmed that the US is unlikely to act without the support of G7 allies. “Congress has taken an important step in this effort by passing the REPO Act, and I will continue intensive discussions with our G7 partners in the coming weeks about how to move forward together,” Yellen said.
The states of the European Union are rather reserved about the confiscation of Russian assets. So far, the European Union has only begun to set aside windfall profits from the frozen assets of Russian central banks. The bloc estimates that the interest on this money could provide around 3 billion euros annually. “The Russians will not be very happy about this. The amount of 3 billion a year is not extraordinary, but it is not negligible,” EU foreign policy chief Josep Borrell said in March.
Still, some European officials have expressed reluctance to proceed with a plan to formally seize Russian assets in Europe. European Central Bank President Christine Lagarde said in early April that the confiscation of Russian assets “is something that needs to be considered very carefully” and could “disrupt the international legal order.”
In addition, critics of the REPO bill argue that seizing Russian reserves abroad could damage the US dollar’s position as the world’s dominant currency. Indeed, the confiscation of Russian assets could prompt countries like China – the largest holder of US Treasuries – to decide that it is not safe to hold their reserves in US dollars.
The conservative Heritage Foundation criticizes the potential seizure of Russian assets, among other things, as undermining the global financial system and “exposing an already fragile economy to unintended consequences and risks for which the United States is unprepared.” The Russian authorities also warned against undermining the global financial system and violating international law.
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Ukraine (War in Ukraine)
Reports from the battlefield are difficult to verify in real time, regardless of whether they come from any side of the conflict. Both warring parties, for understandable reasons, may release completely or partially false (misleading) information.
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author: Jakub Makarovič
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