As Europe Baulks at Confiscating Russia's Assets, Outlook for Ukraine Funding 'Challenging'
© Sputnik / Mihail Kutusov
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There is profound disagreement throughout the West over the issue of Russia's assets, frozen as part of the sanctions campaign over the Ukraine conflict. Europe and the US are hardly on the same page, as the fallout from any illegal move to seize the assets or their profits would hit Europe disproportionately hard.
Despite the decision by the US House of Representatives to finally approve $61 billion in aid for Ukraine after months of deadlock, one can expect further diplomatic hurdles over bankrolling the rest of Kiev’s bills, The Washington Post acknowledged.
The issue of getting their hands on the illegally frozen Russian assets to further funnel them to the Kiev regime is going to be an uphill battle, the outlet predicted.
US officials have been “pushing” disinclined European leaders and diplomats to use some of the seized Russian Central Bank reserves, the authors recalled. But no matter what options for repurposing the Russian assets are proposed, European leaders reportedly fear the detrimental consequences of such a move.
Options proposed have ranged from seizing the assets outright to using windfall profits from the Russian investments to back a loan or bond offering. European Commission President Ursula von der Leyen is a fan of the latter option, telling journalists recently that "The first payments of these windfall profits, that we estimate in the first year around about 2.5 to 2 billion euros a year, might be accessible and can be invested and support Ukraine in the military needs it has."
But officials from the International Monetary Fund and World Bank have balked at confiscating the Russian assets, as the outcome of the annual spring meetings of the boards of governors of the two bodies hosted by Washington a few days ago clearly testifies. US Treasury Secretary Janet Yellen met with her European counterparts during those IMF and World Bank meetings, but a compromise remained out of reach.
European Central Bank chief Christine Lagarde said last week that proposals to tap frozen Russian assets for the Kiev regime's benefit open "a whole series of questions that have to do with respect of the international legal order.”
Amid concerns that international investors could shy away from the euro in response to such a move, European officials have unfailingly noted that they are the ones holding the bulk of the assets. It stands to reason that any Russian response to the attempt to grab its assets would be most painfully felt by Europe.
European officials oppose the confiscation of Russian assets, considering such a decision a potential violation of international law, according to The Washington Post.
— Sputnik (@SputnikInt) April 21, 2024
European Central Bank chief Christine Lagarde said last week that proposals to tap frozen Russian assets for… pic.twitter.com/brUjnhCRcX
The US House of Representatives on Saturday passed a bill dubbed the Ukraine Security Supplemental Appropriations Act as part of its $95 billion package providing foreign aid for Ukraine, Israel, and the Indo-Pacific region. It presupposes $60.84 billion in Kiev-related aid, specifically: $23.3 billion to replenish defense articles and services provided to Ukraine, $13.8 billion for the procurement of advanced weapons systems, and $11.3 billion for US military operations in the region. The bill also includes a measure to provide long-range Army Tactical Missile Systems (ATACMS) to Ukraine.
Part of the package bill is a REPO Act, which would enable US President Joe Biden to confiscate roughly $6 billion in frozen Russian assets held in US banks and send it to Ukraine.
Approximately 300 billion euros ($329 billion) in Russian assets were trapped abroad and illegally frozen in the US and in European countries in February 2022 after the escalation of the Ukraine crisis into a full-blown Russia-NATO proxy war. An estimated $6 billion+ of these funds remain in US banks, with the majority of the cash – 200 billion euros ($221 billion) – stuck in German, French, and Belgian financial institutions.
The expectable decision of the US House of Representatives to provide assistance to Ukraine will benefit America and damage Ukraine, according to Kremlin spokesman Dmitry Peskov. He added that the confiscation of Russian assets would harm the image of the United States and scare…
— Sputnik (@SputnikInt) April 20, 2024
Even if the aforementioned European qualms were to be quashed, the details of "utilizing Russian funds are vexing,” the publication pointed out. Whether it is the option of issuing bonds that would pay investors interest with profits from seized Russian assets, or G7 nations assembling a syndicated loan for Ukraine, each such proposal would face challenging legal and financial hurdles, according to the US media outlet.
There is "no consensus on specifics," one senior US Treasury official was cited as saying, adding:
"We’re thinking of the Russian sovereign assets as a sustainable medium-to-long-term solution for this funding problem.”
The squabble over Russia's assets comes as, on the financial side of it, according to the World Bank's Rapid Damage and Needs Assessment, Ukraine’s reconstruction and recovery will cost $486 billion over the next decade. On the battlefield, the Russian Armed Forces have been making “significant tactical advances,” the outlet cited the Institute for the Study of War nonprofit as saying. On the other hand, Ukraine is running short on shells, ammunition, air defense systems, and manpower.
A final decision on the assets is expected at a June summit of US President Joe Biden and other Group of Seven leaders in Italy.
Moscow has maintained that such an attempt goes against international law. The Russian Foreign Ministry has dismissed the freezing of Russian assets as theft.
Last year, Russian President Vladimir Putin dubbed the West’s asset seizure as “unseemly business,” and stressed that “stealing other people’s assets has never brought anyone good.”
