White House supports seizing Russian assets in favour of Ukraine

President Joe Biden's administration has supported a bill that would allow it to seize some of the US$300 billion in frozen Russian assets to provide it to Ukraine.

Source: Bloomberg, with reference to a memorandum from the National Security Council to the Senate Foreign Relations Committee.

Quote:"The bill would provide the authority needed for the executive branch to seize Russian sovereign assets for the benefit of Ukraine," the National Security Council said in its memorandum, one of three such messages Bloomberg has seen.

Details: Bloomberg noted that Biden's support for this step has appeared against the backdrop of Republicans in Congress blocking the allocation of over US$60 billion to Ukraine, partly due to fears that Washington is carrying too much of a financial burden.

The article says the White House is trying to balance this with concerns that such a move could damage the US financial system's reputation and trigger a flight from the dollar.

The authors note that the president's administration also wants to coordinate this step with G7 allies, especially in Europe, where about US$200 billion of Russian frozen assets are stored, and support for their seizure, particularly unilaterally, is less.

An unnamed senior White House official stated that the National Security Council supports such a measure as part of a range of tools the US is considering to force Russia to pay for damages caused by the war. The World Bank estimates that Ukraine's reconstruction may cost about US$411 billion.

The source, requesting anonymity, told Bloomberg that the topic is expected to be raised at a meeting of G7 leaders on the anniversary of Russia's invasion of Ukraine next month.

Bloomberg indicated that congressional officials see the possibility that this decision could be adopted as part of an additional package of support for Ukraine, although the committees and leaders of both chambers will need to sign off on its inclusion.

The idea of using Russia's own funds to finance Ukraine's reconstruction is seen as a way to strengthen support for Kyiv, as some Republicans oppose continued funding, the article says. Republican House Speaker Mike Johnson supported the idea in an interview with the New York Post, calling it "an eminently responsible thing for us to do".

Republican Sen. Jim Risch, one of the two authors of the bill, noted that there is broad bipartisan agreement on the issue in the Senate.

"After a year of negotiations, it’s past time for the committee to consider this legislation," he said.

Democrats and Republicans on the committee are at odds over the bill's two essential parts, which require Biden to coordinate with G7 nations on asset seizures but do not require their approval, which some say could give the US the ability to act unilaterally.

It also includes language designed to prevent Russia from challenging the arrest in US courts, which could be potentially constitutionally vulnerable.

According to memos seen by Bloomberg, the White House was initially ambivalent about including the G7 approval requirement but later emphasised the need to cooperate with allies.

Such a requirement "would make it more likely that Europe (where the vast majority of assets are located) will be willing to take this step, given their concerns that taking this action in the Russia context could increase the likelihood that we seize assets in other cases where the legal and policy justification is less strong," one of the points in the National Security Council's memo stated.

"It also reduces the risk that this step undermines faith in the United States as a destination for foreign investment," the document pointed out.

Background: Minister of Foreign Affairs Dmytro Kuleba has announced progress in the issue of seizing Russian assets in favour of Ukraine and expressed the hope that it will be possible to approve a unified legal framework for this in 2024.

Prior to that, US President Joe Biden's administration has stepped up efforts to confiscate about US$300 billion in sovereign Russian assets frozen in Western countries.

On 12 December, the European Commission approved a legislative proposal to use the proceeds of frozen Russian assets to help Ukraine recover, which the European Council considered on 14 December.

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