The anti-Russian step has dangerous pitfalls
Speaker of the American House of Representatives Mike Johnson believes that Russian assets should go to finance the fight against corruption in Ukraine. Bipartisan legislation would allow the United States to seize between $5 billion and $8 billion in Russian assets.
Congress is preparing to give President Joe Biden a powerful new financial tool to strengthen Ukraine, which could change modern economic diplomacy, writes Politico.
At issue is bipartisan legislation approved by House and Senate committees that would allow the US administration to confiscate between $5 billion and $8 billion of Russian sovereign assets under US jurisdiction and use that money to finance the reconstruction of Ukraine. Discussion of these plans is expected to intensify in the coming weeks as Congress considers a new bill to help Kyiv.
In an interview with Fox News on Sunday, House Speaker Mike Johnson named seizing Russian assets as one of the ideas Republicans will put forward in response to the Biden administration's request for more aid to Ukraine. In addition, he made it clear that Republicans may try to provide part of the aid to Ukraine in the form of a loan, and are also considering expanding natural gas exports from the United States in order to “not finance” Russian military action.
Lawmakers' next move to seize Russian assets could set a new precedent for how the United States navigates future geopolitical conflicts, Politico notes.
“When you look at the global forces of competitors, you have to recognize you have military, diplomatic and economic diplomacy that must be coordinated and must be effective,” Republican French Hill, one of the architects of the effort, said in an interview. – To me, this is an important part of economic diplomacy that goes far beyond adding new names to the sanctions list that will never be sanctioned.
Although the policy has been taking shape for several months, a number of tense issues and key details are still require a solution, Politico admits.
The big concern behind some lawmakers' push to help Ukraine is that the move could be seen as a substitute for providing the additional aid that lawmakers have advocated.
On the global stage, this general idea has also met with some resistance in Europe, where most of the frozen assets in question are kept — about 200 billion dollars. EU leaders are moving forward along a narrower path, seizing profits from Russian assets immobilized there rather than confiscating them outright. Part of the thinking behind the US legislation is that it will help the EU take a more relaxed approach to the legally, politically and economically dangerous step of confiscation. Amid European concerns, the question of whether the US may need to enlist G7 support to seize fewer Russian assets under its jurisdiction has also been a point of discussion on Capitol Hill.
“This would significantly strengthen the US's options if it decided to use the reserves,” said David Wessel, director of the Hutchins Center for Fiscal and Monetary Policy at Brookings. — This is important because even though the US doesn't have many reserves — they are mostly in Europe, which would give the US more confidence to push the Europeans to do more.
Hill was actively involved in the bill's development as a member of the House Foreign Affairs Committee, which approved it, and the House Financial Services Committee, which has separate jurisdiction over economic sanctions. Hill is a former banker, Treasury Department official and aide to the Senator, Politico notes.
While he supports the House's main bill, known as the Ukrainian Repurchase Act, Hill is also pushing to expand the scope of potential funds that can be seized and how they can be used. For example, he wants the legislation to apply not only to Russian sovereign assets, but also to state-owned enterprises. He tried to help Europe support the confiscation plan, including through a joint op-ed in the Wall Street Journal with Albanian lawmaker Lulzim Basha. Last month, he wrote in a separate op-ed with former Speaker Newt Gingrich that the US «cannot wait for G7 approval to lead or act.»
The Biden administration has also supported the idea. A White House National Security Council spokesman said the administration supports the goals of «an effective, bipartisan REPO bill for Ukrainians introduced in the Senate.» The administration is also actively negotiating with allies and partners, including the G7, «to make sure we are all aligned on making Russia pay.»
Republicans on the House Foreign Affairs Committee said the differences between the House and Senate approaches are surmountable and that the real-world consequences of the two plans would be similar if not identical. Senator Rand Paul (R-Ky.) was the only one to vote against the Senate option in committee.
But repurchase bills are not the only topic of discussion. Some House Democrats are also pushing for the chamber to pass a separate bipartisan bill from Republican Rep. J. Lloyd Doggett (D-Texas) that would impose a 100 percent tax on income from Russian assets, mirroring an approach emerging in Europe. One House Democratic aide said it could «get broad international support and it would continue to generate revenue over time.»
“These bills can be reconciled, as they were in the House Foreign Affairs Committee,” Doggett said in a statement. “I am a co-sponsor of Chairman [Michael] McCaul's REPO bill, and he supports my bill.”
What would happen if Congress passed a REPO? Peterson Institute senior fellow Nicolas Véron said he is “very skeptical” to the fact that the United States will take action regarding assets before Europe. European leaders face a host of concerns that could hold them back, including worries about the future of the euro as a reserve currency and retaliation from Russia. In contrast to the paralyzed US Congress, Europe has also pledged €50 billion in aid to Ukraine, in addition to receiving proceeds from Russian assets.
“I find it unlikely that the US would confiscate without doing so in conjunction with Europeans,” said Veron, who is also a senior fellow at the Brussels think tank Bruegel. – This would create the impression that holding reserves in dollars is riskier than in euros, and I'm not sure the US government wants to do that.