US initiates talks with partners on using frozen Russian assets to aid Ukraine

The Biden administration is in urgent discussions with allies about using frozen Russian assets to aid Ukraine in its military efforts. The move comes as financial support for Kyiv diminishes. According to sources from high-ranking US and European officials, reported by the New York Times, discussions have intensified among finance ministers, central bank heads, diplomats, and lawyers.

Until recently, Treasury Secretary Janet Yellen claimed that without Congressional action, the confiscation of Russian funds was not legally permissible in the United States. Some US officials express concern that the world might refuse to store its funds in the Federal Reserve System of New York or in dollars if the US sets a precedent for confiscating money.

The Biden administration is reevaluating whether it can use its existing authority or if it should turn to Congress to use the funds. Support in Congress is reportedly growing. Talks are underway to pressure the UK, France, Germany, Italy, Canada, and Japan to prepare a strategy by February 24, 2024 — the anniversary of Russia's invasion of Ukraine.

Many details of Biden's strategy remain under discussion. Policymakers need to decide whether the funds will be directed to Ukraine directly or used for its benefit in other ways. There are discussions about whether the funds should be solely for Ukraine's economic recovery and budgetary purposes or if they can be allocated to the military.

Russian assets overview

Russian assets worth over $300 billion have been frozen for more than a year, a response to Russia's invasion of Ukraine. The US, along with Europe and Japan, imposed sanctions to freeze assets, denying Russia access to its international reserves.

The bulk of Russian deposits is believed to be in Europe, including Switzerland and Belgium. Diplomatic negotiations are ongoing on how to access these funds.

US officials were surprised that Vladimir Putin did not repatriate the assets before the invasion. It is speculated that Putin did not believe the funds would be confiscated, as they remained untouched after the annexation of Crimea in 2014.

Confiscating such a significant sum in another country would be unprecedented and could have unpredictable legal and economic consequences. It could lead to legal actions and retaliation from Russia.

As previously reported, President Zelensky mentioned that Western countries are preparing the "outlines of decisions" necessary for transferring frozen Russian assets to Ukraine, hinting that the funds could be used to purchase weapons.

The European Union plans to mobilize €15 billion from frozen Russian assets to provide financial assistance to Ukraine.

The Biden administration's strategy is part of ongoing efforts to support Ukraine amid the conflict, with discussions centering on using frozen Russian assets to aid Ukraine's military and economic needs.

The Security Service of Ukraine (SBU) arrested the assets of Russian businessmen financing the war, amounting to nearly ₴190 billion throughout 2022-2023, as of early August.

Additionally, assets of Russian oligarchs are being seized abroad:

• Great Britain has frozen more than £18 billion ($23 billion) of assets and imposed sanctions against more than 1,550 Russians since Russia began its full-scale invasion of Ukraine and as of mid-June this year. The Czech Republic froze the assets of Russian oligarch Vladimir Yevtushenkov, who is close to Russian President Vladimir Putin.
• Poland also offered to give the frozen assets of the Russian Federation to Ukraine and EU countries.
• On October 12, the Estonian government approved and sent a resolution about using Russian frozen assets to help Ukraine to the parliament.
• The EU is studying the procedure for confiscating €200 billion of frozen assets of the Russian Central Bank. The European Commission is also developing its proposals.
• Belgium created a special €1.7 billion fund, which is filled with taxes on Russian assets frozen in the country,  to support Ukraine.
• In July, Italy announced that it had frozen the assets of Russian oligarchs worth about €2 billion after the Russian Federation invaded Ukraine last year.