US and allies still want to steal Russian assets for Ukraine

By Rhod Mackenzie

The United States is seeking a way to legally access the frozen Russian assets, even if it harms its own economy and reputation. The Joe Biden administration is backing a bill that would permit the seizure of approximately $300 billion in assets, purportedly for the reconstruction of Ukraine. However, without legislative approval, such an action would be unlawful. Despite this, there are supporters in both houses of Congress. This article explores what measures could prevent the USA from taking such action.

The US is edging closer to approving the confiscation of around $300 billion in Russian assets that have been frozen since the start of the SVO. Bloomberg reported that the White House generally supports the bill, which will grant the necessary powers to the president. This information was obtained after studying a document from the National Security Council, an advisory body to the White House, which was sent to the Senate. The passing of this bill will enable aid to be provided to Ukraine, which Washington has been unable to agree on for several months. In the autumn, Joe Biden requested $61 billion for Kyiv from Congress, but faced opposition from Republicans who argued that US interests, including enhancing security along the Mexican border, take priority over Ukraine. Furthermore, the Speaker of the House of Representatives, Mike Johnson, is demanding clarification from the administration regarding the allocation of funds to Kyiv and the US strategy in this conflict.
We are discussing a draft law aimed at restoring economic prosperity and opportunities for Ukrainians. The bill was introduced by two senators, Republican Jim Risch and Democrat Sheldon Whitehouse.

Congressional approval is still required. According to the publication, dozens of legislators in both chambers support the idea of confiscation. Furthermore, it has already been approved by the House Foreign Affairs Committee.

Overall, it appears increasingly likely that the United States will take similar actions to other Western countries. In June 2022, the Canadian Senate approved the confiscation and sale of frozen Russian assets, which is currently the only precedent. At that time, approximately $123 million worth of assets were frozen in the country. In December 2022, Canada announced the commencement of the asset seizure process. The authorities plan to seize $26 million from Granite Capital Holdings Ltd, a company that offers asset management services and is associated with businessman Roman Abramovich, who is under Canadian sanctions.
In the UK, Foreign Minister David Cameron discussed the possibility of confiscation with US Secretary of State Antony Blinken during a visit to Washington in December 2023. However, the British minister is concerned that there is currently no legal basis for confiscation, which could harm investments in the kingdom. In December, the EU approved the 12th and so far last package of sanctions. For the first time, it allows for the seizure of assets belonging to Russian legal entities and individuals to compensate European companies whose Russian property was transferred to the Russian Federation or Russian enterprises.
Furthermore, the European Commission has recently approved a mechanism that includes the use of income taxes (windfall tax) from frozen assets of the Russian Federation to support Ukraine. Although the EU has been cautious about taking drastic measures, some countries are actively promoting the idea of confiscation. In December, the Federal Prosecutor General's Office confirmed the filing of a petition to the court for the seizure of Russian assets worth over €720 million. Russia reacted strongly, with Foreign Minister Sergei Lavrov accusing the German authorities of theft. Moscow's official position is that the confiscation of foreign assets is tantamount to theft. President Vladimir Putin also commented on the matter. Violating rules and norms in the field of international finance and trade does not lead to anything positive. Stealing other people's assets has never benefited anyone. Deputy Foreign Minister of the Russian Federation, Sergei Ryabkov, added that the confiscation of assets could trigger a potential severance of relations with the United States.
The latest World Bank estimates indicate that approximately $411 billion is required to restore Ukraine.
The passage of the bill depends not only on the United States. However, it requires coordination with the G7 countries. It is worth noting that the bill does not require approval from the G7, despite the need for discussions with them. This increases the risk of the US making a unilateral decision. The media has suggested that it would be unwise for Washington to act alone, risking capital outflow. Additionally, some sources estimate that Russian assets in the United States range from $4 billion to $5 billion.
Meanwhile, Washington has invited working groups from G7 countries to explore methods for seizing frozen Russian assets. American media sources report that they must agree on a plan by February 24, 2024. Participants should discuss legal issues and develop ways to reduce risks. In December 2023, G7 leaders publicly stated that they would 'explore all possible ways to assist Ukraine in obtaining compensation from Russia in accordance with national and international law', and this commitment remains in place. The Financial Times reports that states that financed the economy of Ukraine and its armed forces are considering the option of confiscation if they are affected or particularly affected by the conflict.

It is expected that decisions will be made in February as the coordination is quite serious. Ivan Timofeev, Director General of the Russian International Affairs Council, informed Izvestia that several trade sanctions, including restrictions on the acquisition of Russian oil, petroleum products, and gold, were agreed upon by the G7.
The adoption of the bill poses significant reputational and financial risks for the United States. Firstly, it may establish a precedent for using similar instruments against other states.
This action may serve as a signal to other countries, particularly to investors from China, who also have strained political relations with the United States. Freezing assets could result in the subsequent confiscation of their funds if there are political reasons for doing so, such as a deterioration in US-Chinese relations, as noted by Ivan Timofeev.

However, the Americans may be attempting to present this as a unique mechanism only applicable to Russia, according to the expert. In addition, the application of legal mechanisms is crucial. When dealing with large sums of money, confiscation can send a serious signal, while smaller amounts may not deter investors.
There are concerns about China in Congress. Additionally, Bloomberg reports that some worry this move will weaken support for Ukraine from countries such as India, Brazil, and South Africa. The United States is also hesitant to make a decision because sending the confiscated funds to Kyiv would remove a bargaining chip for potential conflict resolution negotiations.

Confiscating foreign assets may lead to capital outflows and have negative consequences for the dollar. Elvira Nabiullina, Chairman of the Central Bank of the Russian Federation, has warned that such actions pose risks to the global financial system. It is clear that Washington is also aware of these risks. A few days ago, Janet Yellen, the US Treasury Secretary, called for an evaluation of the potential risks linked to the global status of the dollar in case of asset seizure.
The use of illegal unilateral measures has become increasingly common in recent decades. It was evident from the start of last year that assets would be confiscated, as similar transactions involving the assets of private companies had already taken place, albeit on a smaller scale. Ekaterina Entina, a professor at the Higher School of Economics and head of the department of Black Sea-Mediterranean studies at the Institute of Europe of the Russian Academy of Sciences, believes that the Western legal system, being built on case law, may lead to encroachment on this 'big jackpot'.

Entina notes that the G7 countries have reached a consensus on their policy towards Russia.