A view of the Russian Central Bank headquarters in downtown Moscow on May 26, 2022.
NATALIA KOLESNIKOVA
President Joe Biden is considering seizing frozen Russian assets, reports said. The frozen Russian bank reserves would be used to fund Ukraine’s war effort. But the plan has its pitfalls, with critics arguing it could destabilize the financial system.
The Biden administration is gearing up plans to seize $300 billion in frozen Russian Central Bank assets to fund Ukraine’s fight against the Russian invasion, reports say.
Administration officials told The New York Times that talks have been held in recent weeks between government officials, diplomats, and finance ministers to use the assets, which were frozen in 2022 as part of sanctions levied on Russia over the unprovoked invasion.
The move comes amid signs that support for Ukraine in some Western countries may be waning, with billions in Ukraine aid blocked by Republicans in the House of Representatives.
According to reports, plans are being formed to announce the move on the second anniversary of Russia’s invasion in February, and US officials are in discussions with allies including France and the UK.
But the plan has its pitfalls, critics say, and there are concerns the move could undermine the global financial system.
“A powerful concern is that doing so could harm international financial stability — and the dollar and euro’s status as reserve currencies — by undermining the essential trust involved in depositing reserves with other nations,” said the board of The Financial Times in an editorial.
Critics say that countries could hesitate to keep funds in dollars if they believe they could be seized, accelerating plans by some nations to move away from the currency.
Agathe Demarais, a fellow on geoeconomics at the European Council on Foreign Relations, wrote in Foreign Policy in November that the move could have unforeseen consequences.
“If Western democracies have previously set a precedent by seizing Russia’s assets, how will these states manage to convince anyone that China or India have no right to confiscate Western holdings if they so wish?” she writes.
There have also been debates about the legality of the move, with the assets protected under sovereign immunity rules, though some legal experts argue that Russia’s invasion of Ukraine was so grave a breach of international law that it has forfeited the right to legal protection.
Most of the funds are held in European banks, and a final decision has reportedly not yet been made on whether to go through with the plan.
BI has contacted the White House for comment.