Over the past few months, diplomats have considered a variety of options, including seizing assets and moving them to Kiev and using profits from Russian investments to back loans and bond issues. A final decision on the proposed reuse of Russian assets awaits a meeting of President Biden and other G7 leaders in Italy in June.
“They've been talking about it for a long time. The question now is whether they can get it done,” said Clay Lowery, executive vice president of the Institute of International Finance and a former Treasury official.
The glacial pace of decision-making highlights an uncomfortable reality for Kiev. Despite a clear breakthrough in Congress this week, Ukraine faces repeated battles to win financial aid. According to joint estimates by governments, the World Bank, and the European Commission, damages and reconstruction costs currently stand at $486 billion, and are rising. And its battered economy remains dependent on international aid.
Things are moving more quickly on the battlefield, where the Kremlin is making steady gains. Russian forces have made “relatively significant tactical advances” in the eastern Ukrainian suburb of Avziivka in recent days, according to the Institute for War Studies, a nonprofit research group.
European officials have balked at confiscating Russian assets, saying it would violate international law, undermine investor confidence in the euro and risk retaliation from Russia.
European Central Bank President Christine Lagarde said last week that proposals to use frozen Russian assets for Ukraine's interests risked “violating the international legal order that we want to protect.”
European officials are also furious that the United States holds most of the assets and that Russian retaliation is likely to reach Europe rather than the United States, and that the United States will take dangerous action. are doing.
As of September, Russian assets totaling $280 billion had been frozen, “most of which is held within the European Union,” according to the G7 Task Force, which monitors funds.
About $210 billion of this is held by Belgian financial services company Euroclear. It is believed that there is only about $5 billion in the United States.
At the IMF and World Bank meeting, Treasury Secretary Janet L. Yellen met with European treasury secretaries in hopes of reaching a compromise.
French Finance Minister Bruno Le Maire told reporters on Wednesday that officials were discussing the European Commission's March proposal to transfer about 3 billion to 5 billion euros a year to Ukraine. This amount represents interest earned on fixed assets and could help reduce Kyiv's budget deficit or acquire additional military equipment.
Ukraine is running low on artillery shells, ammunition and air defense systems amid long-running debates with Washington. But the modest amount being discussed compared to Ukraine's difficult needs has some observers skeptical.
“It doesn't change the battlefield or the fate of the Ukrainian economy,” said Douglas Rediker, chairman of financial advisory firm International Capital Strategies.
Eswar Prasad, a professor at Cornell University and former head of financial research at the IMF, said European finance ministers were also concerned that confiscation of Russian central bank assets would trigger a flight of global capital from the continent. are doing.
But Prasad defended the move as important if it leads to the transfer of more Russian revenue to Ukraine in the long term.
“If we can find a smart way to use Russian resources to start transferring money, even small amounts, to Ukraine, its symbolic importance cannot be overstated,” Prasad said. he said.
Even if Europe's reluctance can be overcome, the details of how Russian funds will be utilized are troubling. Last month, Belgium's prime minister floated the idea of raising money for Ukraine by issuing bonds that would pay interest to investors using profits from Russian assets. The United States is pushing the idea of enlisting G7 countries to form a syndicated loan to back Ukraine's reparations claims against Russia. Each proposal involves complex legal and financial issues.
A senior Treasury official said on condition of anonymity to relay confidential discussions that all parties agree more needs to be done for Ukraine, but there is no agreement on the details. said.
“We see Russian sovereign assets as a sustainable medium- to long-term solution to this financing problem,” a Treasury official said.
If the Ukraine aid bill is approved by the House, the Senate is expected to follow suit soon and sign the bill, granting the president much-needed financial aid to the Ukraine aid bill.
“The passage of this bill should not be taken as evidence that the US obligations to Ukraine are over. Ukraine does not have certainty even in 2025,” said Hrib Vi, executive director of the Center for Economic Strategy, a Ukrainian think tank. Mr. Silinski said. “We need more support to win this war.”
The House is also expected to pass the Rebuilding Economic Prosperity and Opportunity Act (REPO) for Ukrainians, which would give the president the power to seize Russian assets under U.S. jurisdiction.
“Money is going to be needed going forward. If every fight is as tough as this one, the outlook is grim,” said Tobin Marcus, an analyst at Wolf Research and a close aide to Biden when he was vice president. said.