Biden is exploring using Russian money to rebuild Ukraine
Plan would take an act of Congress and poses some risk to US taxpayers
The Biden administration is weighing options for directing tens of billions of dollars in frozen Russian government assets in the United States to the rebuilding of Ukraine, Secretary of State Antony J. Blinken said Thursday.
To do so, however, will likely take an act of Congress and could pose risks to U.S. taxpayers in the long run.
The $33 billion emergency spending request for Ukraine the White House sent to Congress on Thursday includes a proposal for “legislation to streamline the process to recoup proceeds from seized and forfeited assets and use them to remediate the harm caused in Ukraine,” according to a White House fact sheet.
At a House Foreign Affairs Committee hearing on Thursday, Tom Malinowski, D-N.J., asked Blinken if that legislative proposal would “apply to state assets, for example, the much larger amount of money that has been frozen around the world belonging to the Russian Central Bank?”
Blinken responded that “we’ve asked our own lawyers to look at … what authorities would be needed potentially to seize those [Russian government] assets, but not only to seize them but to use them” to rebuild Ukraine.
Sanctions imposed in late February by the Treasury Department on the Russian Central Bank froze its access to its U.S.-based assets. The European Union, the United Kingdom, Japan, and other Western countries also imposed similar sanctions on the foreign reserve currencies that Russia’s central bank had stashed within their jurisdictions.
Russia’s foreign reserves were estimated at the end of January to be worth $630 billion but it is not clear how much of that amount is now frozen in U.S.-allied countries or held within the United States and thus vulnerable to seizure. A March Congressional Research Service analysis estimated that roughly half of Russia’s central bank reserves are now frozen.
Enthusiasts and skeptics
Congress has already demonstrated an appetite for using the frozen assets of Russian business executives close to President Vladimir Putin to benefit the Ukrainian people. The question is whether that willingness will extend to going after the government assets of a sovereign nation.
The House on Wednesday, by a vote of 417-8, passed legislation by Malinowski that would authorize the president to seize and liquidate those assets worth over $5 million that belong to foreigners already sanctioned by the United States whose wealth is partially derived from their support of Putin. The proceeds from the sale of the assets would be directed to post-conflict reconstruction of Ukraine, buying weapons for Ukraine’s military, and to providing humanitarian and refugee assistance to the Ukrainian people.
Malinowski, who formerly was a top human rights official at the State Department during the Obama administration, said he was “delighted” to see the administration in its new Ukraine funding request “embrace this basic principle that we should be using the wealth that built the Putin regime to rebuild the country that Putin is destroying.”
In order to legally permit the transfer of frozen Russian assets to support Ukraine, Congress would have to change two laws: the 1977 International Emergency Economic Powers Act and the 1976 Foreign Sovereign Immunities Act, which provides “unlimited protections to the assets of foreign central banks parked in the United States,” said University of Virginia law school professor Paul Stephan in a Tuesday analysis for Lawfare, a blog focusing on national security law.
Stephan, who formerly held positions with the State and Defense departments, raised multiple concerns about the advisability of Congress passing a law to allow the confiscation of Russian state assets absent a definitive international ruling on the matter.
“In the case of unlawful seizure of state property for well-intentioned purposes, the chance of an unwanted reckoning always exists. Russia will not always be a pariah. When it returns to the fold, it will want its money back,” Stephan wrote. “Almost certainly the United States will comply with the request for repayment, which means that U.S. taxpayers will have to foot the tab for the money that went to Ukraine.”
“The U.S. track record of using Cuban and Iranian assets to pay off the holders of default judgments for human rights claims follows this pattern, with U.S. taxpayers inevitably destined to pay the compensation bill, not the perpetrators of the outrages,” he continued. “I fear the same outcome for Russian atrocities against Ukraine.”