US explores options to seize Russian assets and funnel them to Ukraine

By Natasha Bertrand, CNN

(CNN) — Top Biden administration officials have spent the last year quietly trying to figure out how to divert billions of dollars in frozen Russian money to cash-starved Ukraine.

The proposal the US has hit on, described in detail here for the first time, is based on a novel legal theory to justify seizing and transferring to Ukraine the roughly $300 billion in Russian Central Bank assets which have been frozen in the West since Russia invaded Ukraine in February 2022.

“The White House and the US government believe Russia should be on the hook for paying for all of the damage and destruction they have caused in Ukraine,” a US official said.

But the rare maneuver would require buy-in from US allies in the Group of 7 (G7) to have a real impact, officials said. The vast majority of Russia’s central bank assets that were frozen by the G7 and the European Union are held by the EU, with the US only holding around $5 billion worth, officials told CNN.

It would also require Congress to pass a bill introduced last year, called the REPO Act, that gives the president authority to move forward with seizing Russian assets held in the US.

Senior Biden officials have been working both with G7 allies – which include Canada, France, Germany, Italy, Japan, the UK and the EU – and US lawmakers to refine the proposal, which rests on the idea that nations affected by Russia’s violations are permitted under international law to try to force Moscow back into compliance using the law of countermeasures.

The issue has taken on new significance as Congress continues to balk at the White House’s request for billions in supplemental funding to help support Ukraine’s war effort. But US officials insist that the initiative is not a substitute for the $61 billion the administration says it needs now for Ukraine.

The discussions have intensified ahead of the second anniversary of the war on February 22, multiple officials told CNN. The US proposal was discussed among senior leaders at meetings of the G7 in November and December, a US official said, and will be reviewed again at the next G7 meeting at the end of February, around the anniversary.

The US has emphasized to allies that the seizures would be done for a “very specific legal reason,” one of the officials told CNN, and not one that is so broad that it risks spooking financial institutions with assets held overseas—a key concern of some G7 allies, including Germany, which has led to some hesitation over the US proposal, officials added.

The US has also argued to allies that because Russia’s invasion has upended the international order, they have the right to engage in such countermeasures even though they are not directly at war with Russia.

“For us, we’ve spent decades investing in an international order that involves peace and stability, it involves sovereignty, it involves respect for one’s neighbors’ sovereignty,” a senior administration official said. “And all of that is being not just questioned but assaulted head-on by what Russia is doing in its appalling aggression in Ukraine.”

‘A novel and new approach’

The legal case is necessary, officials explained, not only so that the US is on solid legal ground in the event that Moscow challenges the seizures in an international forum or in a US court, but also so that the US can convince a critical mass of allies to join in the effort.

The US has put a new twist on the law, however, by arguing that instead of returning the seized assets to Moscow if it comes back into compliance, the West can keep the money as a down payment of sorts toward what Russia will owe Ukraine anyway for its reconstruction.

“It is temporary and reversible insofar as Russia is going to owe Ukraine much more than that for the unbelievable damage Russia has inflicted,” the senior administration official said. “And really, it’s Russia’s obligation to make up the difference in time.” The US would describe these assets as a “credit” towards what Russia will eventually owe, the official added.

G7 leaders hinted at this strategy in a joint statement released in December, saying, “We reaffirm that consistent with our respective legal systems, Russia’s sovereign assets in our jurisdictions will remain immobilized until Russia pays for the damage it caused to Ukraine.”

There has not been an independent judgment yet, however, of exactly how much Russia will owe to Ukraine or whether Moscow will even agree to pay, which could open the US and its allies up to a legal challenge.

“No one disagrees that Russia almost certainly owes money to Ukraine,” said Scott R. Anderson, a Senior Fellow with the National Security Law Program at Columbia Law School. “But there hasn’t been any sort of determination to that effect by any sort of international legal body.”

Anderson said the US proposal “is pushing the envelope of what’s been done before.”

“Does that mean it’s unlawful? No, I don’t think it necessarily does,” he added. “But I do think it’s a novel and new approach.”

A senior administration official said that even if the US and its allies found a path forward on transferring the seized assets to Ukraine, the initiative is not an alternative to the supplemental funding the administration has asked for from Congress.

“This is a really important project, but it’s also a long-term project,” the senior administration official said. “And it’s a project whose scale is enough to make a difference—and at the same time not nearly enough to be sufficient on its own. And so I just can’t emphasize strongly enough that it is not a substitute for the supplemental funding that we continue to call on Congress to enact immediately for the sake of Ukraine’s survival. We need the supplemental and we need REPO—both of them.”

A domestic law to seize Russia’s assets

House and Senate Democrats and Republicans are working with the White House to tweak and refine aspects of the REPO Act, which was introduced in June by a bipartisan group of lawmakers including Republican Sen. Jim Risch, the ranking member of the Senate Foreign Relations Committee, and Democratic Sen. Sheldon Whitehouse.

The bill’s language is fairly broad, and says that the president may confiscate “any Russian sovereign assets subject to the jurisdiction of the United States,” and that this seizure “shall not be subject to judicial review”—meaning that the owner of the confiscated assets cannot challenge it in court after the fact.

The law, if passed, would likely be challenged by Russia in US court anyway, Anderson said.

“I think there’s a good chance [Russia] may end up legally challenging this,” he said. “If they do, how are the courts going to deal with it? It’s just a big open question.”

There is also some debate happening now between the White House and lawmakers over whether to add an amendment to the REPO Act that would require the president to certify that he will move forward with seizing Russia’s assets inside the US only if he has the support and buy-in of the G7, officials told CNN.

Inserting that provision could help shield the White House against political pressure from lawmakers who may demand that President Joe Biden seize Russia’s assets unilaterally and use those to fund Ukraine’s war effort instead of US taxpayer money. The provision would be especially useful at a moment when Republicans are increasingly questioning why the US is providing Ukraine with billions of dollars per year in military and humanitarian aid.

Both the White House and lawmakers are getting increasingly impatient, however, for the legislation to be enacted. With Congress still fighting over how to avoid a government shutdown, it is unclear how soon the bill will come to a vote.

“There is broad bipartisan agreement on the REPO Act in the Senate and House,” Risch, who co-sponsored the bill, told CNN.

“The bill as drafted grants the President authority to seize Russian sovereign assets frozen in the United States. Countries like Russia that want to undermine the international system don’t care about the rule of law,” Risch added. “The US government and our allies can and should be willing to put them on notice that they will not be allowed to act with impunity. After a year of negotiations, and with such broad support, it’s past time for the committee to consider this legislation.”

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