Seize Russian Assets and Send the Money to Ukraine
By David Bernell and Ambassador Thomas Graham, Jr. (Retired)
The war in Ukraine is changing. Russia is seeing gains, and Ukraine is facing increasing challenges and shortages, particularly with regard to soldiers and weapons, which have resulted in the recent loss of territorial control to the Russian army, including the city of Avdiivka in late February.
The United States and its NATO allies have been sending arms to Ukraine since the start of the war, and this aid has proved to be decisive in Ukraine’s defense. But the U.S., which has been the largest supplier of Ukraine, is faltering in its role. The Biden Administration has asked Congress to approve additional funding for Ukraine in the amount of $61 billion. The Senate has passed the bill, but Speaker of the House Mike Johnson refuses to hold a vote on the bill, which would pass if he would do so. Johnson is under the direction of Donald Trump, who does not want aid to be sent to Ukraine, whose words and deeds signify support of Vladmir Putin and Russia in this war, who is somewhere between a skeptic and a foe of NATO, and who has indicated that he would be fine with Putin and Russia doing “whatever the hell they want” to NATO countries.
There is no reason that a twice-impeached, out of office former President should exert such control over U.S. foreign policy. It is an alarming development, and it is in the service of a policy this is disastrous for Ukraine, and very threatening for the United States, NATO, Europe, and much of world. The former president’s appalling behavior goes well beyond actions taken by any other (would-be, current, or former) American public official. He is deliberately seeking to undermine and possibly destroy a country aligned with United States – a country whose success and survival is important for American security – all for his own personal political gain. It is time for the Biden Administration to take control back of U.S. policy and return to more strongly protecting the interests of the United States and its allies.
When the war started, the United States took action to punish Russia and raise the cost of its invasion. This included a long list of economic sanctions that affected the financial sector of Russia, access to technologies that could aid its military such as semiconductors, telecommunications, encryption, and sensors, and Russia’s revenues from the sale of oil and natural gas. (The effort to hit Russia hard in the pocketbook with respect to sales of oil and natural gas has had limited effect, as China and India have stepped in to purchase abundant Russian energy supplies at relatively low prices.) One remarkable step the United States and its allies took, which was a major departure from previous efforts to impose sanctions on foreign governments, was to freeze assets in the United States that belonged to the Russian central bank. This cut off the bank’s access to more than $300 billion dollars in foreign reserves held in the U.S. and EU countries.
That money is still sitting in place, unused (and earning profits). While the U.S. and EU have considered if and how they could seize some or all of these funds to aid Ukraine, they have been reluctant to do so. But it is now time to take such action. The EU has taken a first step in this direction, adopting a law that will set aside profits made on Russia’s frozen assets, with the goal of using the money to finance reconstruction in Ukraine. But it is a relatively small step, focusing only on the earnings of Russian assets, not the assets themselves.
We have argued in the past that the United States and NATO have been “moving the lines” in Ukraine with regard to ratcheting up what is considered appropriate action in response to Putin’s invasion. This has included supplying Ukraine with increasingly sophisticated weapons, along with a greater quantity of weapons, and training Ukrainian soldiers. The economic sanctions placed on Russia when the invasion began were also an example of pushing the boundaries that had typically characterized such sanctions. Another opportunity to do this now exists. It is time to move the lines again: The United States and its allies should seize Russian assets and give them to Ukraine so it can fight the war, ensure its own survival, provide for its citizens, and engage in reconstruction.
The arguments for doing this are not only strategic: protecting Ukraine and NATO, and pushing back against what has been described as an “unholy alliance” among Vladmir Putin and his fellow travelers who are “bent on destroying the post Second World War international order and the institutions that are the foundations of liberal democracies.” They may also have a basis in international law. Proponents of seizing Russia’s assets, such as former U.S. Treasury Secretary Larry Summers, have argued that under the doctrine of state countermeasures, “Nations that hold Russian assets are entitled to cancel their obligations to Russia and apply those assets to what Russia owes for its breach of international law.” Current U.S. Treasury Secretary Janet Yellin has also recently indicated her support for the this position. There is precedent for doing this. After the Iraqi invasion of Kuwait in 1990, billions of Iraq’s overseas funds were seized and sent via the United Nations to compensate victims harmed in the war.
There are important objections that have prevented the seizure of Russian assets thus far. They concern the legality of seizing foreign assets and the precedent of doing so. The Finance Minister of France, Bruno LeMaire, has stated that confiscating Russia’s assets would be a violation of international law, and contradictory to the concept of countermeasures, which are not meant to be compensatory. Even Secretary Yellen had questioned the legality of such a move early in the war, saying that the U.S. had no legal authority to take Russia’s assets. (Legislation before Congress would explicitly provide this authority, but it is a long way from passage.)
Moreover, there is worry about the long-term implications. The first of these concerns is a weakening and fragmentation of the global financial system into competing blocs that could result from “weaponizing” Western financial institutions, which are the major institutions used throughout the world. For example, a significant portion of frozen Russian assets are held by a Belgian company called Euroclear, a depository for global securities. If Euroclear is subject to the enforcement of seizing Russian assets, this would signal to countries around the world that Western financial institutions were unreliable, and subject to the foreign policy goals of the United States and its allies. This could also have a deterrent effect, keeping central banks, corporations, and private investors from the Global South from investing in Western economies or using their financial institutions.
Another concern is that given the sheer volume of wars and conflicts around the world, the application and use of such a precedent could get out of hand. And even if it didn’t, there would almost certainly be instances in which such a precedent would work against the very countries that might wish to use it now with regard to Ukraine. If China or Brazil has a conflict one day with the United States or a country in the EU, and these Western countries have set a precedent by taking Russia’s assets, they will be unlikely to convince anyone that China or Brazil have no right to seize Western assets.
These are serious concerns, but they have to be weighed against the threat of inaction against a state whose ambitions, stated goals, and actions – including the sheer barbarity witnessed in the invasion of Ukraine – threaten the world with much more harm than possible economic divisions and resentment against Western powers. A Russian victory in this war would destroy Ukraine, put Poland and the Baltic states in greater danger of Russian invasion, put Europe under threat of an aggressive and emboldened Russia, weaken NATO, and show the United States to be an unreliable ally, leaving it further isolated in the world.
Vladmir Putin has thrown away decades of practice and precedent that has sought to keep countries safe from having their territory forcibly taken, or their very existence ended to satisfy the goals of great powers – a practice that was common among countries and kings and dictators throughout history. And he has done so to fulfill his fantasy of restoring a Russian empire and the fiction that there is an unbreakable historical unity among Ukrainians and Russiansgoing back to the founding of Kievan Rus more than one thousand years ago, long before there was a Russian nation, state, or even a city of Moscow.
It is appropriate, therefore, in the midst of war in Ukraine, to set a precedent in international law that a country’s financial assets are subject to seizure if it takes actions such as Russia has done: unjustly invading another country, systematically bombing civilians, abducting children, torturing and murdering civilians and prisoners of war, carrying out forced deportations, engaging in rampant sexual violence, and trying to erase the existence of another country. These are the larger stakes at issue. They cannot and should not be ignored, and if we do so, it is at our own peril.
About the Authors
David Bernell is an Associate Professor of Political Science in the School of Public Policy at Oregon State University. His research and teaching focus on international relations, American domestic and foreign policy, and US energy policy. He is the author of the books Constructing US Foreign Policy: The Curious Case of Cuba, and The Energy Security Dilemma: US Policy and Practice. Prior to coming to OSU, he served as an appointee in the Clinton Administration with the US Office of Management and Budget, and with the US Department of the Interior.
Ambassador Thomas Graham Jr. is former acting director of the U.S. Arms Control and Disarmament Agency under President Clinton, and the special representative of President Clinton for Arms Control, Nonproliferation and Disarmament. He served as General Counsel of ACDA during the presidencies of Jimmy Carter, Ronald Reagan and George H.W. Bush. He is the author of several books on nuclear arms control, U.S. foreign policy, and American politics.
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