Updated Jun 23, 2023, 9:52am EDT

The debate over using Russian assets to rebuild Ukraine is just beginning

REUTERS/Pavel Klimov/File Photo

Sign up for Semafor Principals: What the White House is reading. Read it now.

Title icon

The News

The U.S., European Union, and U.K. are beginning to transfer to Kyiv some of the $350 billion or more of Russian assets frozen since the Kremlin’s full-scale invasion of Ukraine last year.

The British government said this week it had established a fund for Ukraine that will initially include around $3 billion from the forced sale of the Chelsea Football Club, previously owned by Russian oligarch Roman Abramovich. The Justice Department said it’s sent $5.4 million to Ukraine seized from a separate Russian businessman. And Estonia finalized this month legislation that allows Tallinn to also transfer to Ukraine frozen funds from Kremlin-linked individuals — the first EU country to do so.

But there’s still uncertainty about what to do with Russian state assets, which make up around $300 billion out of this $350 billion. Current and former U.S. officials told Semafor there’s deep concerns about the legality of essentially expropriating a state’s assets and transferring them to another. The Treasury Department is also concerned that seizing sovereign funds could undercut America’s position as a financial safe haven and erode global support for the U.S. dollar.

“It is critical that any actions we take in this space are coordinated and unified across our allies and partners,” a White House official told Semafor in a statement. “At this time, we are working collectively to more accurately map out exactly where these assets are located in the world, which will inform our subsequent discussions.”

The U.K. took a step this week that U.S. officials said could be a model for how the issue of Russia’s state assets will be managed going forward. London introduced legislation that allows it to indefinitely hold Kremlin monies invested in the British financial system. These assets would only be released to Moscow after Russia agrees to pay reparations to Ukraine as part of any political settlement to end the war.


“We are committed with the G-7 to ensuring that these assets remain immobilized until there’s a resolution of the conflict in which Russia pays for the damage it’s caused,” U.S. Treasury Secretary Janet Yellen testified before Congress last week. “And we’re working with allies and partners also in the G-7 and the so-called Repo Task Force on this issue. Now, however, it’s the case that most of the assets, Russia’s sovereign assets, are not in the United States.”

Title icon

Know More

The U.S. and Europe remain firm that Russia must pay for the reconstruction of Ukraine, not Western governments and taxpayers. The World Bank estimates that the rebuilding of the country will cost at least $411 billion. And the European Union estimates that Kyiv currently faces a €110-billion shortfall in funding through 2027.

The Biden administration has provided Ukraine with $75 billion in military and economic assistance since the war began. “So, let’s be clear: Russia is causing Ukraine’s destruction, and Russia will eventually bear the cost of Ukraine’s reconstruction,” U.S. Secretary of State Antony Blinken said this week at a London conference focused on Ukraine’s rebuilding.

Title icon

Jay’s view

While the U.S. and its allies are clear that they want Russia to pay for the rebuilding of Ukraine, there’s no consensus on how best to make that happen.

Former senior U.S. officials — Larry Summers, Robert Zoellick, and Philip Zelikow — published a widely read piece in Foreign Affairs this month that argues the Biden administration and Europe must marshal the $300 billion in frozen Russia state assets to remake Ukraine. They cited the Marshall Plan, used to rebuild Europe after World War II, as a model. “A new European recovery program centered on Ukraine and funded by Russian assets is not only a key to winning the peace; it is a key to winning the war and countering Moscow’s strategy of attrition and ruin,” they wrote.


The former officials said there’s precedent for the U.S. expropriating sovereign assets from a criminal state — Iraq after the U.S. invasion in 2002. And they said such financial “countermeasures” are backed by American laws and wouldn’t undermine global confidence in the U.S. financial system or the dollar.

Other former U.S. officials aren’t convinced. Kimberly Donovan, who served in the Treasury Department’s Financial Crimes Enforcement Network, told Semafor Iraq was unique as the invasion was backed by a United Nations Security Council resolution, and that U.S. laws don’t currently exist to govern the expropriation of foreign state assets. She’s worried such a U.S. move will only further global calls, led by China, Russia, and Brazil, for the “de-dollarization” of the global financial system and pose legal challenges for Western banks.

Donovan, in contrast, backs the U.K. decision to hold Russian state assets as leverage to force Russia to pay future repatriations. “State assets can remain immobilized until Russia agrees to pay and if Moscow fails to do so, sovereign assets can then be seized as collateral,” she said. Donovan currently leads the Economic Statecraft Initiative at the Atlantic Council.

Title icon

Room for Disagreement

Russian President Vladimir Putin’s government said the West’s seizure of Russian assets — either sovereign or privately held — is against international law. The Kremlin recently seized control of a Finnish and German power company in response to Europe’s moves. And the Russian government has also set up a fund to repay targeted Russian entities through foreign asset seizures.

“The U.K. and other countries that have encroached on Russia’s assets, are obliged to unfreeze them immediately, without any terms,” Putin’s spokesman, Dmitry Peskov, said last month. “Otherwise, they violate all norms and rules of both their domestic legislation and international law.”

Title icon