The United States and its G7 partners are considering the seizure of hundreds of billions of dollars of frozen Russian state assets as reparation for damage caused by Russia's invasion of Ukraine in 2022. The high costs of that war to Ukraine's backers, especially the United States and the European Union, and the increasing domestic political challenges they face to the authorization of additional appropriations, have made the frozen assets an attractive source of funds for Ukraine's military and its reconstruction. Speaking ahead of the February 2024 G20 meeting, Secretary of the Treasury Janet L. Yellen said that “it is necessary and urgent for our coalition to find a way to unlock the value of these immobilized assets to support Ukraine's continued resistance and long-term reconstruction. While we should act together and in a considered way, I believe there is a strong international law, economic, and moral case for moving forward.”Footnote ¹

Since the war began, the United States and other nations have contributed billions of dollars to support Ukraine.Footnote ² Through January 15, 2024, the United States has committed more than €67 billion, two-thirds of which have been in the form of military assistance.Footnote ³ European Union (EU) institutions have pledged over €85 billion, ninety percent of which has been financial aid.Footnote ⁴ Individual EU member states have also provided significant assistance, with Germany committing more the €25 billion, the third most after the EU and the United States, and the United Kingdom, the next highest, providing almost €15 billion.Footnote ⁵ Additional assistance from the EU and the United States has been announced since these figures were tabulated.Footnote ⁶

More than two years after the 2022 invasion, political obstacles in the United States, the European Union, and elsewhere are impeding continued support. At the end of 2023, Hungary blocked a proposed €50 billion EU package, though agreement on the deal was eventually reached.Footnote ⁷ In the United States, where funding for Ukraine ran out in December 2023,Footnote ⁸ opposition from Republicans, principally in the House of Representatives, has blocked the approval of new appropriations.Footnote ⁹ A Senate-endorsed bill that includes more than $60 billion for Ukraine, is pending in the House.Footnote ¹⁰ A recently announced U.S. aid package, assembled from money saved from previously approved arms transfers, will provide some additional U.S. military assistance as a temporary measure.Footnote ¹¹ But without additional aid, Ukraine's army will apparently soon run short of needed supplies.Footnote ¹²

With funding for Ukraine facing political hurdles, attention has increasingly focused on the approximately $300 billion of frozen Russian central bank assets that have been held primarily in Western banks since the 2022 invasion.Footnote ¹³ “[M]ainly invested in foreign securities, bank deposits and nostro correspondent accounts,”Footnote ¹⁴ according to one estimate about $207 billion of the assets are denominated in Euros and $67 billion in dollars, with the remainder in British pounds, Japanese yen, and other currencies.Footnote ¹⁵ Roughly €191 billion are held by Euroclear, a Belgian securities depository.Footnote ¹⁶ A relatively small amount—perhaps $5 billion—is held in the United States.Footnote ¹⁷ States where the frozen assets are located agree that they “will remain immobilized until Russia pays for the damage it has caused to Ukraine,”Footnote ¹⁸ which is estimated, as of the end of 2023, to be $486 billion.Footnote ¹⁹ While there is broad international agreement that Russia must pay for its unlawful acts,Footnote ²⁰ there is no consensus yet on seizing Russian central bank assets as reparation.Footnote ²¹

Only recently has the United States come around to that conclusion. In May 2022, Secretary Yellen said that “it would not be legal now, in the United States, for the government to seize [the assets].”Footnote ²² Treasury officials also expressed concern about the precedent that central bank asset seizure would create and the effect it would have on other countries’ willingness to invest their foreign currency reserves and other assets in the United States.Footnote ²³ But by October 2023, Secretary Yellen said that she “support[ed] harnessing windfall proceeds from Russian sovereign assets immobilized in particular clearinghouses and using the funds to support Ukraine.”Footnote ²⁴ In February 2024, she went further and said that the Russian assets should be “unlocked,” that “seizure would be the simplest possibility,” and that the “countermeasures theory [for seizing the assets] . . . has strong justification in international law.”Footnote ²⁵ Secretary Yellen did not, however, endorse a “preferred strategy,” stressing instead that “we want the G7 and our allies to work together and we want to find a way . . . consistent with domestic and international law.”Footnote ²⁶ In private G7 discussions, however, the United States has “taken a more assertive stance,” seeking to convince G7 and allied countries “that there is a route to seizing the assets ‘consistent with international law’ . . . ‘as a countermeasure to induce Russia to end its aggression.’”Footnote ²⁷ Supporting the U.S. position, UK Prime Minister Rishi Sunak has remarked that countries “must be bolder in seizing the hundreds of billions of frozen Russian assets.”Footnote ²⁸ British Foreign Secretary David Cameron added: “The world has changed. The arguments against [seizure] are not as strong as people said, and there is a legal route.”Footnote ²⁹ The Biden administration is working with partners in Congress on legislation—the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act—that would permit the president to “seize, confiscate, transfer, or vest any Russian sovereign assets, in whole or in part, and including any interest or interests in such assets, subject to the jurisdiction of the United States.”Footnote ³⁰

Despite U.S. pressure, the European Union, where most of the assets are located, has not yet agreed to their seizure. Bruno Le Maire, France's finance minister, said at the end of February 2024 that “[w]e don't have the legal basis to seize the Russian assets and we should never act if we don't obey . . . international law and . . . the rule of law.”Footnote ³¹ Discounting the countermeasures theory promoted by the United States, he stressed that “[w]e should really understand that taking such [a] significant decision, which is to take advantage of the state property, needs a very strong legal basis.”Footnote ³² European countries and the European Central Bank are also worried about retaliatory measures that Russia might take against the assets of European companies in Russia, the effect seizure would have on financial stability, and its consequences for the Euro as a reserve currency.Footnote ³³ Responding to these concerns, Secretary Yellen said: “With regard to financial stability, I suppose a risk would arise if there were a massive shift away from currencies, but I think that is extremely unlikely, especially given the uniqueness of this situation, a situation where Russia is brazenly violating international norms. . . . Realistically, there are not alternatives to the dollar, euro, yen, so I'm not too worried about that.”Footnote ³⁴

Though the EU has not acceded to the seizure of Russia's central bank assets, it is moving toward commandeering the profits gained from their investment while frozen. In February 2024, the EU Council took a preliminary step in that direction by requiring central securities depositories in the EU that hold more than €1 million of Russian Central Bank assets to create separate accounts for revenue from the assets and by prohibiting depositories from disposing of the net profits.Footnote ³⁵ In March, Josep Borrell Fontelles, EU High Representative for Foreign Affairs and Security Policy, “presented a . . . proposal . . . to use the windfall revenues from Russian immobilised assets to support Ukraine in its fight to prevail . . . [with] 90% . . . allocated via the European Peace Facility [to provide military assistance] and 10% via the EU budget [to provide other forms of aid].”Footnote ³⁶ EU leaders “invite[d] the Council to take work forward” on the proposal.Footnote ³⁷ Concurrently, the United States proposed to G7 members that they use the profits from the frozen assets to back the issuance of $50 billion of bonds, the proceeds of which would support Ukraine.Footnote ³⁸

Russia has warned the EU and the United States not to seize the frozen assets. In December 2023, Dmitry Peskov, press secretary to Russian President Vladimir Putin, said that “any such move by the West would amount to ‘theft’, violate international law and undermine reserve currencies, the global financial system and the world economy.”Footnote ³⁹ He noted further that there “was a specific list of Western assets that Russia could seize in retaliation.”Footnote ⁴⁰ According to RIA Novosti, the Russian state-owned news agency, the total foreign direct investments in Russia from Australia, EU member states, G7 countries, and Switzerland that have been blocked since the beginning of the war amount to $288 billion as of the end of 2022.Footnote ⁴¹ Deputy Foreign Minister Sergey Ryabkov said in January 2024 that “[w]e will obviously assume measures if . . . threats [of seizure] are to be fulfilled, including tit for tat actions.”Footnote ⁴² In response to the EU's decision to use the profits from the assets, Peskov said: “This is another statement in line with the movement to ruining the legal basis of European and international law. . . . The Europeans are perfectly aware of [the] damage that such decisions may cause both to their economy and to their image, their reputation as reliable guarantors of inviolability of property. Damage will be inevitable.”Footnote ⁴³