June 13, 2024
Funds

Opinion | Ukraine urgently needs Russia’s frozen funds. Yet the West still balks.


Whichever genius in the congressional Republican caucus decided to condition aid to Ukraine on the passage of a comprehensive immigration overhaul deserves a medal … from the Kremlin. House Republicans are giving every indication that they will torpedo any immigration deal that gets done in the Senate because it won’t meet their maximalist, close-the-border demands. That will then give them the perfect excuse not to pass any further funding for Ukraine.

Russian dictator Vladimir Putin should be overjoyed: The beleaguered people of Ukraine will be left to fight for their freedom against his unprovoked invasion without desperately needed support from the world’s most powerful democracy.

Yet there is still a giant pot of money that President Biden and other Western leaders could access to aid Ukraine — if only they can find the will to act. When the full-scale Russian invasion occurred nearly two years ago, the United States and its allies froze Russian central bank funds in their own financial institutions. It is estimated that some $300 billion of Russian funds is being held in the West, with the bulk of it (roughly $200 billion) in Belgium’s Euroclear, a major financial clearinghouse. At least $5 billion of the Russian holdings are in the United States.

To put these figures into perspective, $300 billion is more than the sum total of all international aid pledged to Ukraine (roughly $264 billion) since Russia’s full-scale invasion on Feb. 24, 2022. It’s more than four times as large as the $64 billion aid package that is stalled in Congress.

It would seem like a no-brainer for the United States and its allies to take the Kremlin’s money and give it to the victims of Russian aggression. That would literally make Russia pay for its war crimes. To hear Russian spokesmen squawk about “21st century piracy” and “theft … of state property” after their country illegally invaded Ukraine is grimly amusing — and shows how much the Kremlin fears an asset transfer.

Yet, as was evident at the Davos conference last week, the Biden administration and its European partners continue to drag their feet — just as they have dragged their feet in providing badly needed weapons to Ukraine. (Only now are Ukrainian pilots finally training on the F-16.)

The definitive case for using the frozen Russian funds to help Ukraine was laid out in a 123-page paper written by the distinguished constitutional scholar Laurence H. Tribe of Harvard Law School and a team of lawyers from Kaplan, Hecker & Fink. The report was released in September by the Renew Democracy Initiative (RDI), a pro-democracy group founded by the former Russian chess champion Garry Kasparov. (I’m on RDI’s advisory board.)

A bipartisan group of lawmakers has introduced legislation to facilitate the transfer of frozen Russian funds, but the Tribe report makes a persuasive — indeed, irrefutable — case that the president already has the power to do so under the 1977 International Emergency Economic Powers Act. Not all European countries have similar statutory authority, but they could quickly pass legislation that would give their leaders similar powers.

The report points out that presidents previously have used their authority to transfer funds from criminal regimes. After Iraq’s invasion of Kuwait in 1990, President George H.W. Bush froze Iraqi assets in the United States and eventually redirected that money to a United Nations-administered fund for the victims of Iraqi aggression. And after the Taliban took control of Afghanistan in 2022, Biden announced that Afghan government holdings in the United States would be frozen and transferred to a fund in Switzerland outside the Taliban’s control for the good of the Afghan people. So why not do something similar with Russian funds?

The Biden administration was initially skeptical of the case for seizing Russian funds, claiming that it lacked the authority to act and worrying that doing so might harm the dollar’s standing as the world’s reserve currency, erode the sanctity of private property and undermine the prospects of a peaceful settlement of the war. Thanks in part to the widely circulated Tribe report, the administration’s resistance has waned. In October, the White House signaled that it would support the asset seizure and launched into discussions with European countries about facilitating the move.

Yet, at the Davos conference last week, where Ukrainian President Volodymyr Zelensky made an urgent plea for the Russian funds to be released, Penny Pritzker, the U.S. special representative for Ukraine’s economic recovery, hardly sounded encouraging. “The first thing you know is a ton of lawyers need to get involved. No decision’s been made,” she said. “If a decision gets made it’s going to end up being collective. It’s a misperception to think this is going to be a panacea effect. There’s real effort going on, but we are far from a conclusion.”

Western officials are discussing halfway steps such as giving Ukraine the interest payments from the Russian holdings or using the Russian funds as collateral for loans to Ukraine, even though neither plan would generate nearly as much money as Ukraine needs. The Wall Street Journal reports that “G-7 officials hope to present options in time for the second anniversary of the invasion in February. But it could take at least another year before anything actually happens.”

Another year?!? Ukraine can’t wait that long. It’s in a life-or-death struggle, and it needs the money now. The administration is simply not making the case with the urgency that it deserves. Tribe told me that he found “the administration’s stalling on this vital matter to be both frustrating and to a degree inexplicable.” He explained his frustration:

“When it looked like resorting to these frozen Russian assets might give Congress or its counterparts in the E.U. an excuse not to appropriate tax-supported funds for Ukraine on an ongoing basis, I could understand, although I didn’t agree with the calculation that seems to have held back both the Biden administration and some of our allies. But ever since it became plain to anyone who understands the political dynamics that waiting for Congress would be like waiting for Godot, no such analysis could explain, much less justify, letting Ukraine dangle in the wind under ongoing Russian assault while we dither over the fine details of how best to seize and transfer the hundreds of billions of dollars that Russia will never get back and that continue to lie idle.”

I share Tribe’s frustration. The initial hope was to use the frozen Russian funds to rebuild Ukraine (estimates of the damage caused by the Russian invasion are north of $400 billion), but, given the looming U.S. aid cutoff, the money might need to be spent right now to acquire the ammunition that Ukraine needs to stave off Russian assaults — particularly Russian air attacks on its population centers.

Congressional Republicans don’t seem to care how many Ukrainians die as a result of their political games. The Biden administration clearly does — yet, despite its commitment to supporting Ukraine, the White House continues to move with agonizing, bureaucratic caution on this vital matter. With Republicans shamefully turning against Ukraine, the administration should be moving heaven and earth to provide that embattled democracy with the funding it needs to survive. So far, I’m sorry to say, the administration simply hasn’t done enough. Time is running out.



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