Senior U.S. officials have stepped up their efforts to lead Western governments to use hundreds of billions of dollars of frozen Russian central bank reserves to help Ukraine, according to three people who spoke on the condition of anonymity to describe internal conversations.
Get a curated selection of 10 of our best stories in your inbox every weekend.
The intensifying push to use the assets for Ukraine comes as U.S. and European governments that support Kyiv encounter new domestic political roadblocks for their plans to send taxpayer money to the war effort, although officials insist the matters are unrelated. The Kremlin has an estimated $300 billion frozen in various bank accounts throughout Western countries, but experts have warned that simply taking that money would face legal challenges and pose major financial risks.
Congress dropped U.S. aid to Ukraine last month from a measure to extend government operations into November at the urging of House Republicans, a growing number of whom strongly oppose assistance for Ukraine’s war effort resisting Russia’s aggression. The White House had sought $20.6 billion for Ukraine over the summer, but the Senate pared that back to $6 billion, and then the House forced all of it out of the short-term spending law.
Biden asks for $20.6 billion for Ukraine as counteroffensive sputters
U.S. officials are adamant that Russian bank reserves are not a substitute for new emergency military and economic aid from Washington, which Ukraine needs to survive the next several months of the war. Even the most aggressive and optimistic advocates for redirecting the bank holdings believe it would take months — if not more than a year — for the money to reach Kyiv. And most of Russia’s reserves by far are held in Europe, where central bankers have expressed strong reservations about the impact of a seizure on their economies. If Washington acted alone, it could only make use of the estimated $5 billion held in the United States — a tiny share of the $300 billion of Russian money held around the world.
But within the Biden administration, the case for encouraging the West to redirect the assets is growing, even as some U.S. officials worry that the money might not be able to be used to pay to fight the war, but only for reconstruction.
On Wednesday, meeting with leading Western financial officials in Morocco, Treasury Secretary Janet L. Yellen endorsed a European proposal to tax the wartime earnings of the Russian bank assets and transfer the proceeds to Ukraine — an intermediate step that could take effect quickly. Ukrainian officials have discussed using the tax proceeds along with some of the seized Russian assets as collateral to raise far greater sums from private investors, according to two other people with knowledge of the matter, who also spoke on the condition of anonymity to discuss private conversations. That would free Ukraine to borrow money on capital markets without having to risk as much of its own scarce reserves.
On Wednesday, the Belgian government announced the creation of a $1.8 billion fund for Ukraine paid for by tax revenue from profits generated on seized Russian central bank assets. Most of the Russian money held in Europe is at the Belgian-based clearinghouse Euroclear. (The money will be used to help Ukraine with military support, civilian aid and refugee assistance, a government spokesman said.)
Alarm grows in Kyiv, Washington as GOP House blocks Ukraine aid
Besides the GOP divisions over Ukraine, NATO member Slovakia recently elected a pro-Russian leader opposed to additional aid for Kyiv. Using Russian reserves would have the obvious political upside of not imposing greater costs on Western taxpayers.
“It is certainly back now as part of the discussion,” said one person briefed on internal talks by senior U.S. and European financial officials. “The U.S. has become much more open to not just seizing, but also using the Russian reserves.”
In the years before launching its full-scale invasion of Ukraine, Russia amassed $600 billion in foreign currencies from selling oil and gas to the West. This “war chest” was intended to give the Kremlin a financial backstop against the West if it ever were hit with broad economic sanctions.
To safeguard the money, Russian President Vladimir Putin put more than half of the funds in Western accounts, with roughly $200 billion kept in Europe alone. Then Russia sent troops on a failed mission to decapitate the government in Kyiv in February 2022. Within days, the U.S. and European governments froze the assets, cutting Putin off from the reserves and eliciting a sharp rebuke from Moscow.
Since then, the funds have sat untouched in bank accounts in countries such as France, Germany and Austria, with smaller amounts sequestered in Japan, Australia, the United States and Canada. In May, the Group of Seven Western industrialized nations announced in a joint statement that the assets “will remain immobilized until Russia pays for the damage it has caused to Ukraine.”
West takes aim at Russian central bank reserves, threatening blow to economy
But as the war has turned into a protracted stalemate, a growing chorus of experts has pushed for more immediate action.
Get a curated selection of 10 of our best stories in your inbox every weekend.
The intensifying push to use the assets for Ukraine comes as U.S. and European governments that support Kyiv encounter new domestic political roadblocks for their plans to send taxpayer money to the war effort, although officials insist the matters are unrelated. The Kremlin has an estimated $300 billion frozen in various bank accounts throughout Western countries, but experts have warned that simply taking that money would face legal challenges and pose major financial risks.
Congress dropped U.S. aid to Ukraine last month from a measure to extend government operations into November at the urging of House Republicans, a growing number of whom strongly oppose assistance for Ukraine’s war effort resisting Russia’s aggression. The White House had sought $20.6 billion for Ukraine over the summer, but the Senate pared that back to $6 billion, and then the House forced all of it out of the short-term spending law.
Biden asks for $20.6 billion for Ukraine as counteroffensive sputters
U.S. officials are adamant that Russian bank reserves are not a substitute for new emergency military and economic aid from Washington, which Ukraine needs to survive the next several months of the war. Even the most aggressive and optimistic advocates for redirecting the bank holdings believe it would take months — if not more than a year — for the money to reach Kyiv. And most of Russia’s reserves by far are held in Europe, where central bankers have expressed strong reservations about the impact of a seizure on their economies. If Washington acted alone, it could only make use of the estimated $5 billion held in the United States — a tiny share of the $300 billion of Russian money held around the world.
But within the Biden administration, the case for encouraging the West to redirect the assets is growing, even as some U.S. officials worry that the money might not be able to be used to pay to fight the war, but only for reconstruction.
On Wednesday, meeting with leading Western financial officials in Morocco, Treasury Secretary Janet L. Yellen endorsed a European proposal to tax the wartime earnings of the Russian bank assets and transfer the proceeds to Ukraine — an intermediate step that could take effect quickly. Ukrainian officials have discussed using the tax proceeds along with some of the seized Russian assets as collateral to raise far greater sums from private investors, according to two other people with knowledge of the matter, who also spoke on the condition of anonymity to discuss private conversations. That would free Ukraine to borrow money on capital markets without having to risk as much of its own scarce reserves.
On Wednesday, the Belgian government announced the creation of a $1.8 billion fund for Ukraine paid for by tax revenue from profits generated on seized Russian central bank assets. Most of the Russian money held in Europe is at the Belgian-based clearinghouse Euroclear. (The money will be used to help Ukraine with military support, civilian aid and refugee assistance, a government spokesman said.)
Alarm grows in Kyiv, Washington as GOP House blocks Ukraine aid
Besides the GOP divisions over Ukraine, NATO member Slovakia recently elected a pro-Russian leader opposed to additional aid for Kyiv. Using Russian reserves would have the obvious political upside of not imposing greater costs on Western taxpayers.
“It is certainly back now as part of the discussion,” said one person briefed on internal talks by senior U.S. and European financial officials. “The U.S. has become much more open to not just seizing, but also using the Russian reserves.”
In the years before launching its full-scale invasion of Ukraine, Russia amassed $600 billion in foreign currencies from selling oil and gas to the West. This “war chest” was intended to give the Kremlin a financial backstop against the West if it ever were hit with broad economic sanctions.
To safeguard the money, Russian President Vladimir Putin put more than half of the funds in Western accounts, with roughly $200 billion kept in Europe alone. Then Russia sent troops on a failed mission to decapitate the government in Kyiv in February 2022. Within days, the U.S. and European governments froze the assets, cutting Putin off from the reserves and eliciting a sharp rebuke from Moscow.
Since then, the funds have sat untouched in bank accounts in countries such as France, Germany and Austria, with smaller amounts sequestered in Japan, Australia, the United States and Canada. In May, the Group of Seven Western industrialized nations announced in a joint statement that the assets “will remain immobilized until Russia pays for the damage it has caused to Ukraine.”
West takes aim at Russian central bank reserves, threatening blow to economy
But as the war has turned into a protracted stalemate, a growing chorus of experts has pushed for more immediate action.
