Commentary on Political Economy

Thursday 22 February 2024


It’s Time to Seize Russia’s Reserves

Russian rubles Photo: Maksim Konstantinov/Zuma Press

The White House is promising tough new sanctions on Russia after the murder of opposition leader Alexei Navalny, but the test of seriousness will be whether President Biden is willing to seize Russia’s sovereign assets and transfer them to Ukraine.

Mr. Biden and Western nations have been reluctant to confiscate the $300 billion or so in Russian reserve funds parked in Western financial institutions. They were frozen when Russia invaded, but there they sit two years later collecting dust and interest. It’s almost as if Mr. Biden and German Chancellor Olaf Scholz imagine that the money might be an inducement for Vladimir Putin to negotiate a peace deal and rejoin the civilized world.

But there are no signs that Mr. Putin will settle for a peace short of Ukraine’s capitulation. His forces are on the offensive again, driving Ukrainians from the city of Avdiivka in the last week. With Ukrainians running low on artillery shells and other ammunition, Russia’s tactic is to saturate territory with days of artillery and aerial bombardment and then move in with infantry when nothing is left.

A broader Russian breakthrough can’t be ruled out. The more territory Mr. Putin takes, the harsher his terms are likely to be.

Kyiv urgently needs ammunition and the money to make or buy it. The European Union voted recently to supply 50 billion euros in aid, but Republicans in the House are blocking even a vote on new weapons. It’s a shameful position that will tar the Republican Party as the abandonment of South Vietnam did Democrats. But if the impasse continues, Mr. Biden and Western Europe need to find money elsewhere. Russian reserves are the best source.


The Biden Administration has debated the asset seizure for two years, but the arguments against it get worse by the day. One concern is that the seizure would violate international law, especially the concept of “sovereign immunity.” But this assumes that Russia hasn’t itself violated every international legal norm with its brutal aggression.

Ukraine is pursuing its legal right to recompense through international forums, but this takes years. Meantime, various laws and treaties justify such countermeasures as asset seizures. Third parties not directly involved in the conflict can take such measures. A recent 199-page legal analysis by five authors, including Harvard professor Laurence Tribe, makes a detailed and compelling case for why the U.S. President and other nations can seize the assets. The best way to enforce international law and deter future aggression is to impose costs on the aggressor.

The Kremlin could retaliate by seizing Western assets in Russia, and it probably would. But most companies doing business in Russia have already taken sizable if not total losses on their investments since the invasion.

Another worry is that the precedent would open the gate for various bad actors, such as China, to seize sovereign assets. But does anyone think Xi Jinping would need the Russian precedent if he thought such an act was in China’s best interests? There would also be costs for any nation that tried it.

In any case asset-seizure precedents have already been set. President George H.W. Bush issued an executive order in 1992 that compelled every U.S. bank to hand Iraqi sovereign assets to the Federal Reserve. Some $50 billion in Iraqi funds were paid as recompense for Saddam Hussein’s invasion of Kuwait. The U.S. also froze and then transferred for humanitarian purposes some $3.5 billion of assets belonging to the Afghanistan Central Bank in 2022.


Some U.S. financial officials fear that transferring the assets to Ukraine would make countries less likely to hold dollar assets. The concern is that this would undermine the dollar’s role as a global reserve currency, and thus make other financial sanctions harder to enforce. But there’s no real alternative now to the dollar’s reserve-currency role, despite efforts by China, Russia and others to create one. Western banks are far safer than any others.

The Senate Foreign Relations Committee voted 20-1 in January to support the asset seizure, and the sense of Congress is clear. An asset seizure isn’t a substitute for a weapons bill because Ukraine needs the ammunition right now. But the move would signal to Ukraine that the West isn’t abandoning its cause.

Western sanctions have failed to change Mr. Putin’s behavior, and seizing Russia’s sovereign assets won’t either. But it would increase the price that the Kremlin pays for its murderous attempt at national conquest. Mr. Putin probably thinks Mr. Biden and European leaders are too afraid to do it. All the more reason to open the Russian bank vault.

Journal Editorial Report: Paul Gigot interviews Senator Dan Sullivan of Alaska. Images: AFP/Getty Images/Zuma Press Composite: Mark Kelly

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Appeared in the February 22, 2024, print edition as 'It’s Time to Seize Russia’s Reserves'.

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