US President Joe Biden on April 24 signed a large-scale foreign assistance act, which empowers officials in this country to identify and confiscate Russian assets in the US, using them for profit. benefit of Ukraine.
That means the US will have an additional $5 billion in support for Ukraine, coming from assets of the Central Bank of Russia that have been frozen in the US. The confiscation would be carried out under the provisions of the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act (REPO Act), which was included in the aid bill.
However, it is unlikely that the US will confiscate Russian assets without the consent of other members of the G7 and the European Union.
Russian flag outside the Russian Embassy in Washington DC, USA. Photo: AP
Difference between “freezing” and “confiscating” assets
The US and its allies froze $300 billion in Russian foreign assets after Russia launched a special military campaign in Ukraine. These assets are largely located in European Union countries and have so far remained untapped. About $5 billion of those assets are located in the US.
Although Russia cannot access assets that have been frozen by the United States and the West, they still belong to Russia.
Normally countries can easily freeze assets, but confiscating those assets and using them for Ukraine’s benefit requires complex legal procedures.
For more than a year, Western countries have been disagreeing about the legality of confiscating Russian assets and sending them to Ukraine.
How long does the foreclosure process take?
The new US law requires the president and the Treasury Department to begin identifying Russian assets in the US within 90 days and report to Congress within 180 days.
One month after that deadline, the president will be authorized to “confiscate, dispose of, transfer or dispose of” any property owned by the Russian government within U.S. jurisdiction.
However, the US wants to continue consulting with global allies to act together. This will likely slow down the foreclosure process.
US national security advisor Jake Sullivan said on April 24 that this issue will be an important topic when leaders of G7 countries meet in Italy next June. He also emphasized, “ideally everyone should act together”.
Who has the right to decide?
President Biden has the power to decide how Russia’s proceeds will be used for Ukraine’s benefit, but he will have to consult with other G7 members before acting.
The act states that “any effort by the United States to confiscate and repossess Russian sovereign assets” must be carried out in conjunction with allies, including G7 countries, the European Union including 27 members and other countries.
Treasury Secretary Janet Yellen, said the US would not be able to act without the support of its G7 allies.
After the bill was passed, Ms. Yellen said: “Congress took an important step in passing the REPO Act and I will continue to discuss details with G7 partners in the coming weeks” said Yellen. .
Will Europe also confiscate Russian assets?
The European Union has begun to separate profits from frozen assets of the Russian Central Bank. The EU estimates interest on that money could bring in about 3 billion euros ($3.3 billion) a year.
“The Russians will definitely not be happy. The amount of 3 billion per year is not unusual but it is not a small number either,” EU Commissioner in charge of foreign policy Josep Borrell told reporters in March.
However, some European leaders still expressed hesitation about the official plan to confiscate Russian assets in Europe.
At a Council on Foreign Relations event earlier this month, European Central Bank President Christine Lagarde said that confiscation of Russian assets “needs to be considered very carefully” because it could “ disrupt the international legal order”.
Risks
Critics of the REPO Act say the weaponization of global finance against Russia could damage the dollar’s status as the world’s dominant currency.
The confiscation of Russian assets would also cause countries such as China – the largest holder of US Treasury bonds – to argue that USD reserves are unsafe.
The Heritage Foundation has criticized Russia’s asset seizure, saying it weakens the global financial system, which is priced in dollars. According to this organization, “it will expose the already fragile economy to unforeseen consequences and risks that the United States is not prepared for.”
Russia’s reaction
Russia warned that it has drafted a law to respond if its assets are confiscated by the West and used to rebuild Ukraine.
“We have prepared a response. We have prepared a draft law for immediate consideration on retaliatory measures. Europe will lose more than us,” Russian Senate President Valentina Matviyenko declared on April 23.
Ms. Matviyenko, a member of Russia’s Security Council, did not give specific information about Moscow’s response to the confiscation of Russian assets.
The Kremlin has repeatedly stated that any action to confiscate assets would go against the principles of the free market set by the West and would reduce confidence in the dollar and euro, while also hindering investment. global investment and undermine confidence in Western central banks.
Some officials in Moscow say that if Russian assets are confiscated, assets of foreign investors trapped in special accounts known as “C” types in Russia could face liquidation. similar part. It is unclear exactly how much money is in these accounts.
Meanwhile, on April 24, a Russian court ruled to confiscate $439.5 million from US bank JPMorgan Chase. This is a judgment on the side of Russia’s state-owned bank VTB, after VTB had its account frozen in the US by JPMorgan to enforce the US government’s sanctions against Russia after the Russia-Ukraine conflict broke out in 2019. 2022.
Last week, VTB filed a lawsuit with the arbitration court in St. Petersburg to get back all the money frozen in accounts in the US. This move took place after JPMorgan announced plans to withdraw from the Russian market.
