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Western nations are actively exploring ways to seize Russian central bank assets to fund Ukraine as political disputes in the US and Europe threaten its flow of financial support.
G7 officials have intensified talks in recent weeks on spending some of the roughly $300bn in immobilised Russian sovereign assets, a radical step that would open a new chapter in the west’s financial warfare against Moscow.
The push comes as two crucial financial aid packages for Ukraine worth more than $100bn faltered this week, as Republicans in the US Congress and Viktor Orbán of EU member Hungary took a stand against funding Kyiv.
Seizing Russian assets could provide an alternative stream of funding for Kyiv, especially given the expected huge costs of postwar reconstruction.
But until now G7 governments have mostly balked at such a move, fearing that some foreign investors in dollar and euro assets would take flight.
Although Washington has never publicly backed confiscation, the US has privately taken a more assertive stance in recent weeks, arguing in G7 committees that there is a route to seizing the assets “consistent with international law”.
“G7 members and other specially affected states could seize Russian sovereign assets as a countermeasure to induce Russia to end its aggression,” said a US government discussion paper, seen by the Financial Times, which was circulated in G7 committees. The US Treasury declined to comment.
A US official said Washington was engaged in active conversations on the use of Russian sovereign assets and believed there was a short timeline to make a decision. They suggested it could be discussed at a possible G7 leaders’ meeting to coincide with the second anniversary in February of Russia’s full invasion of Ukraine.
EU proposals have so far stopped short of seizing the Russian assets themselves, instead aiming to skim off profits generated for financial institutions such as Euroclear, where €191bn in sovereign assets are held.
But calls for tapping the assets themselves have grown louder as cracks have emerged in the political consensus on additional funding for Ukraine. Aid packages worth $60bn and €50bn in Washington and Brussels, respectively, failed to win approval this week.
Lord David Cameron, the UK foreign secretary, has expressed confidence there is “a legal route” to confiscate the assets and has suggested the UK might act with the US if other G7 allies cannot be convinced.
“Extraordinary times require extraordinary measures,” he told a UK parliamentary committee on Thursday, adding he was “pushing hard” for the proposal within the G7.
He denied there would be a “chilling effect” on inward investment, insisting that those investors likely to feel perturbed would already “be pretty chilled by the fact we have frozen” the assets.
The US official said the G7’s legal discussions reflected the importance of abiding by international law in responding to Russia’s invasion. The goal over the coming weeks would be to work through all the critical issues so the G7 could move together.
European countries, particularly Germany, France and Belgium, have been reluctant to make such a move, citing legal concerns such as the protections that sovereign assets enjoy under international law. The bulk of the €300bn of Russia’s state assets are held in Europe.
Even so, one western official said there were “definitely live conversations” within the G7 and a “growing consensus” in favour of using Russian sovereign assets for Ukraine.
“It’s going back to the question of: is it just up to western citizens and treasuries to pay for the war, or should the Kremlin also be on the hook?”
The US paper argued that Russia’s invasion of Ukraine meant the seizure of assets could be “pursued as a lawful countermeasure by those states that have been injured as specially affected by Russia’s violation of the international law”.
“We need to find a way to get cash to Ukraine, in whatever form,” said one EU diplomat involved in the failed summit negotiations this week. “And more and more countries are pointing at the assets and wondering why they are still sitting there.”
