The United States is now allowed to seize Russian state assets. How does that work?

Washington (AFP) – Greater United States Aid package for Ukraine Other allies signed by President Joe Biden on Wednesday allow the administration to do so as well Seizure of Russian state assets Existing in the United States and used for the benefit of Kyiv.

That could mean another $5 billion in aid for Ukraine, coming from the Russian central bank's already frozen holdings in the United States. The forfeitures will be implemented under the provisions of the Repo Act, which is short for Law on Rebuilding Economic Prosperity and Opportunities for Ukrainians, Which was incorporated into the aid bill.

But the United States is unlikely to seize the assets without the approval of other members of the G7 and the European Union.

What is the difference between freezing and seizing?

The United States and its allies immediately froze $300 billion in Russian foreign property at the beginning of Moscow's invasion of Ukraine. This money remained untapped – mostly in EU countries – as the war continued. But nearly $5 billion of it is in the United States

The frozen assets are disabled and cannot be accessed by Moscow, but are still owned by Russia. While governments can generally freeze property without difficulty, converting that property into confiscated assets that can be sold to Ukraine requires an additional layer of judicial procedures, including legal basis and adjudication in court.

For more than a year, officials from multiple countries have debated the legality of confiscating the money and sending it to Ukraine.

How quickly could this happen?

The new US law requires the President and the Treasury Department to begin identifying the locations of Russian assets in the United States within 90 days and submit a report to Congress within 180 days. One month after that period, the president will be allowed to “seize, confiscate, transfer or otherwise own” any Russian state sovereign assets, including any interest, within US jurisdictions.

But the United States wants to continue consulting with global allies and working together, which is likely to slow the process.

National Security Advisor Jake Sullivan said on Wednesday that the issue will be an important topic when G7 leaders meet in Italy next June, adding that “the ideal is for us all to move together.”

What can the United States do with this money?

Biden is given leeway to decide how to spend money for Ukraine — but must consult with other G7 members before acting.

The legislation states that “any effort by the United States to seize and reuse Russian sovereign assets” must be undertaken together with international allies, including the G7, the 27-nation European Union, and other countries as part of a coordinated effort.

Policymakers, including Treasury Secretary Janet Yellen, said the United States was unlikely to act without the support of G7 allies.

“Congress took an important step in this effort by passing the Repo Act, and I will continue extensive discussions with our G7 partners in the coming weeks on a collective path forward,” Yellen said after the bill passed.

Will Europe also seize Russian assets?

The European Union has already begun setting aside windfall profits generated by the Russian central bank's frozen assets. The union estimates that interest on that money could save about 3 billion euros ($3.3 billion) each year.

“The Russians will not be very happy. The amount of money, $3 billion a year, is not exceptional, but it is not insignificant.” He told reporters in March.

However, some European leaders have expressed hesitation about moving forward with a plan to formally seize Russian assets in Europe.

European Central Bank President Christine Lagarde This came during an event of the Council on Foreign Relations Earlier this month, he said the seizure of Russian assets was “something that should be considered very carefully” and could “begin to violate the international legal order.”

What are the risks?

Critics of the repo law say using global finance as a weapon against Russia could damage the US dollar's position as the world's dominant currency.

A seizure of Russia's assets could prompt countries such as China – the largest holder of US Treasuries – to determine that it is not safe to hold their reserves in US dollars.

the The Heritage Foundation criticized the conservatives Seizing Russian assets for, among other things, undermining the global dollar-denominated financial system, saying it would “expose the already fragile economy to unintended consequences and risks for which the United States was not prepared.”

Russian authorities warned that the new law would undermine the global financial system.