The U.S. on April 20 became the first nation to adopt legislation green-lighting confiscating frozen Russian assets for Ukraine.
President Joe Biden signed the REPO Act alongside a $95 billion foreign aid bill that included $61 billion for Kyiv on April 24, setting the legal basis for liquidating immobilized Russian assets held in the U.S.
Since the West froze around $300 billion belonging to the Russian Central Bank (CBR) at the start of the full-scale invasion, discussions among the G7 countries about what to do with the assets have been divisive.
Some have argued that the liquidated assets should go to Ukraine’s reconstruction while others have pointed toward bolstering the country’s troubled war effort.
Legal barriers and lobbying from opponents have so far held up the transfer of funds to Ukraine. At the same time, Kyiv’s allies struggle to fund the war-torn country. Proponents have cited the assets as a clear solution.
The bill overcomes the main legal concern, Russia’s sovereign immunity, by paving the way for the Biden administration to confiscate the assets due to Russia’s violation of international law.
However, while the bill shows Washington’s support for repurposing Russian assets in response to Moscow’s illegal invasion of Ukraine, it does not guarantee confiscation of the assets. This is a decision for President Joe Biden.
“It’s a step in the right direction, but not yet a game changer,” Timothy Ash, a senior strategist at BlueBay Asset Management, told the Kyiv Independent.
In his opinion, the dial will only fully move forward once Biden seizes the assets, which could set a precedent for other countries. While the President signed the bill on April 24, he has not yet confirmed he will utilize the assets.
Russian assets in the U.S. are only a drop in the bucket, totaling approximately $4-5 billion. This barely scratches the surface of Ukraine’s $486 billion reconstruction bill or $100 billion annual war costs.
The act acknowledges that the majority of the assets are outside Washington’s jurisdiction and emphasizes the need for greater transparency in locating Russian assets in the U.S., asserting that financial institutions must submit information on Russian assets to the Treasury.
It also indicates that all Russian state assets, potentially including state companies, are subject to confiscation. This includes the CBR, the Russian Direct Investment Fund, the Russian Finance Ministry, and property and financial institutions owned by the Kremlin. Assets under diplomatic immunity cannot be touched.
By Ash’s estimation, there are some $320 billion in frozen CBR assets around the world. The total is close to $400 billion when counting assets belonging to Russian individuals, including oligarchs.
The vast majority are in Europe, particularly Belgium, with the Brussels-based company Euroclear holding some $192 billion in Russian assets.
The U.S. bill emphasizes that repurposing the assets should be a multilateral effort alongside the G7 nations, EU, Australia, and other countries where they are located.
According to a report from the Kyiv School of Economics (KSE), the act's wording suggests that Washington won’t go ahead without similar decisions from its international allies.
“The REPO Act creates an opportunity for the Biden administration to press Europeans to use the assets of the Russian government to help Ukraine survive economically,” Ambassador Robert Zoellick told the Atlantic Council.
While Ash doesn’t believe the act alone will sway the EU, he does believe the bloc will be forced to follow suit if Biden goes ahead and confiscates the assets.
“The question is, will the Biden administration really push on European leaders to bite the bullet in terms of using or seizing and allocating immobilized Russian assets to Ukraine?” he said.
Opponents have warned that Western currencies could be destabilized if nations, like China or Saudi Arabia, pull their assets from Western nations out of concern they could become the next targets.
To ease these apprehensions, the act carefully mentions that only Russian assets are covered, stressing that the U.S. is only backing this idea due to the unique circumstances of Russia’s full-scale invasion.
If enacted, the bill proposes that the Secretary of State will be responsible for dispersing the liquidated assets with the USAID Administrator. The money could go towards an international fund or body to assist Ukraine in reconstruction efforts, as well as economic and humanitarian assistance.
The EU agreed earlier in March to use the profits generated from Russian assets frozen within the bloc. According to European Commission President Ursula von der Leyen, Ukraine could receive the first billion euros by July with the potential of 3 billion euros by the end of the year.
The G7 nations have also discussed using the assets as collateral for loans to Ukraine. European Commission Executive Vice President Valdis Dombrovskis noted that this would be a likely part of the final plan.
However, Ash believes the easiest way forward is for all Western leaders to unanimously agree to utilize the assets. But, political inertia is the main barrier.
“ (The act) pushes the process forward. But the fundamental problem still is a lack of political willingness to do it, particularly in Europe.”