World leaders urged to unlock frozen Russian central bank assets

Treasury Secretary Janet Yellen testifies before a House Financial Services Committee hearing on Capitol Hill, Feb. 6, 2024, in Washington. (AP Photo/Manuel Balce Ceneta, File)

WASHINGTON  — Treasury Secretary Janet Yellen on Tuesday offered her strongest public support yet for the idea of liquidating roughly $300 billion in frozen Russian Central Bank assets and using them for Ukraine’s long-term reconstruction.

“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,” Yellen said in remarks in Sao Paulo, Brazil, where Group of 20 finance ministers and central bank governors are meeting this week.

“I believe there is a strong international law, economic, and moral case for moving forward. This would be a decisive response to Russia’s unprecedented threat to global stability,” she said.

READ: Ukraine estimates cost of reconstruction at $750 billion

The United States and its allies froze hundreds of billions of dollars in Russian foreign holdings in retaliation for Moscow’s invasion of Ukraine. Those billions have been sitting untapped as the war grinds on, now in its third year, while officials from multiple countries have debated the legality of sending the money to Ukraine. More than two-thirds of Russia’s immobilized central bank funds are located in the EU.

Using the assets to help Ukraine “would make clear that Russia cannot win by prolonging the war and would incentivize it to come to the table to negotiate a just peace with Ukraine,” Yellen said.

The idea of using Russia’s frozen assets has gained traction lately as continued allied funding for Ukraine becomes more uncertain and the U.S. Congress is in a stalemate over providing more support. But there are tradeoffs since the weaponization of global finance could harm the U.S. dollar’s standing as the world’s dominant currency.

READ: UK PM Sunak: West should be bolder about seizing Russian assets

Yellen said Tuesday that it is “extremely unlikely” that tapping the frozen funds would harm the dollar’s standing in the global economy “especially given the uniqueness of the situation where Russia is brazenly violating international norms. Realistically there are not alternatives to the dollar, euro and yen,” Yellen said.

John Kirby, President Joe Biden’s national security spokesman, said at a White House press briefing Tuesday that “we still believe Russia needs to be responsible for the damage” brought onto Ukraine by “exploring the option of using those frozen assets.”

He said “we still need more legislative authorities from Congress” to spend the immobilized funds, and “we have got to have our coalition partners to come along with us.”

Bipartisan legislation circulating in Washington called the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act would use assets confiscated from the Russian Central Bank and other sovereign assets for Ukraine. Leading lawmakers had tried to push it as a way to help provide Ukraine aid, but it has since not moved forward.

Earlier this month, the European Union passed a law to set aside windfall profits generated from frozen Russian central bank assets. Yellen calls that “an action I fully endorse.”

Brazil kicked off its presidency of the Group of 20 nations this month, with finance ministers meeting this week. Topics for discussion include poverty alleviation, climate change and the wars in the Gaza Strip and in Ukraine. G20 leaders are slated to gather at a Nov. 18-19 summit in Rio.