Yellen calls for way to use frozen Russian assets to aid Ukraine

Connie Queline

Yellen calls for way to use frozen Russian assets to aid Ukraine

US Treasury Secretary Janet Yellen called on the world’s largest advanced economies to find a way to “unlock the value” of immobilised Russian assets to help bolster Ukraine’s defense against Russia’s invasion and for long-term reconstruction after the war.

“I believe there is a strong international law, economic and moral case for moving forward,” Yellen said Tuesday in Sao Paulo in prepared remarks before meeting with her counterparts from the world’s top economies.

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Her comments come as Group of Seven nations are debating what to do with sovereign assets that were frozen at the outbreak of the invasion, as Ukraine’s financing needs remain persistently high and the war enters its third year with no sign of abating.

The European Union, G-7 nations and Australia have frozen about €260 billion ($282 billion) in the form of securities and cash, with more than two-thirds of that immobilised in the EU. The parties all agree that those funds should remain off-limits to Russia unless it agrees to assist in Ukraine’s reconstruction, but they’re at odds over the legality of seizing the assets outright.

“This would be a decisive response to Russia’s unprecedented threat to global stability,” Yellen said. “It would make clear that Russia cannot win by prolonging the war and would incentivise it to come to the table to negotiate a just peace with Ukraine.”

The US and UK have been pushing G-7 allies to seize the central bank assets outright, but the group’s European members, especially France and Germany, are currently opposed to the move over legal concerns and worries that it could damage the stability of the euro as well as set a dangerous precedent.

Discussions over using the assets have intensified as Russian President Vladimir Putin’s forces gain momentum on the battlefield. As Republicans in Washington continue to set hurdles for new aid for Kyiv, the Biden administration is keen to offer Ukraine another important signal of its support.

The position of EU member states is crucial as the vast majority of the funds are in Europe, mostly at the Belgium-based clearing house Euroclear. The clearing house and the European Central Bank are both skeptical of the right to seize the assets.

Still, G-7 nations are discussing options. Among the ideas under discussion is using the funds as collateral to raise debt or as guarantees for loans.

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The EU is slowly making progress on plans to at least apply a windfall tax to the profits generated by the immobilised funds. Last year, the funds enabled profits of €4.4 billion.

Yellen also highlighted the conflict in the Middle East, saying she had urged the Israeli government to take “a number of steps,” including reinstating work permits for Palestinians and reducing barriers to commerce in the West Bank.

“These actions are vital for the economic well-being of Palestinians and Israelis alike,” she said.

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