SAO PAULO – The United States and its allies will keep seeking options to tap $300 billion in frozen Russian sovereign assets, U.S. Treasury Secretary Janet Yellen said after days of rancorous talks failed to seal a deal to aid Ukraine’s war effort.
Yellen told Reuters in an interview on Thursday that any action would need an airtight legal rationale, which emerged as a sticking point in negotiations this week on the sidelines of a meeting of Group of 20 (G20) finance ministers hosted by Brazil.
Yellen said she challenged French Finance Minister Bruno Le Maire to help develop the options sought by Group of Seven (G7) leaders in time for their June summit after Le Maire publicly rejected her view that there is a legal case for monetizing the assets.
G7 officials have struggled for a year over what to do with Russian sovereign assets to help Ukraine, which Moscow invaded two years ago. The debate spilled into the public during this week’s G20 meeting, revealing deep divisions among G7 allies.
Russia has threatened major retaliation if the West seizes its assets. Some European countries fear doing so could set dangerous precedents and undermine faith in Western currencies, although Yellen has called a massive shift out of those currencies “highly unlikely.”
In the interview she said that while some Europeans were skeptical about asset seizure, there were options such as using the assets as collateral for loans and a new proposal to issue a syndicated loan, which she described as an “interesting option.”
“There are complicated legal issues here. We agree that whatever we do has to have a firm international legal rationale, as well as domestic rationale,” Yellen said.
“We’re going to continue to work. (Le Maire’s) staff are working with ours. We urged him to help us come up with options, options that we can present to the leaders.”
OPTIONS FOR G7 LEADERS
Yellen said G7 leaders had asked their staffs “to come up with as many viable options as we can, and to analyze both the benefits and costs associated with them.”
The decision on “what to do – the go-no-go – is up to them,” she said, adding that it was unclear if the leaders would reach such a decision at their summit in Italy in June.
Yellen said it was critical not to jeopardize the work of Belgian clearing house Euroclear, which holds most of the Russian assets. “Euroclear is an infinitely important financial utility, and we must be exceptionally careful not to do anything that endangers its functioning,” she said.
The U.S. Treasury secretary said she remained convinced that “countermeasures” legal theory offered a strong case for unlocking the value of the Russian assets, a view shared by many prominent experts. Under international law, countermeasures provide a lawful means for states to respond to violations of their rights.
All the G7 governments agree on the urgent need to move forward to help Ukraine, which has faced military setbacks from Russia, a Western official said.
Le Maire argued for a more modest approach, centered on the European Union’s moves to use windfall profits from the frozen assets to generate revenues for Ukraine.
Washington supports the windfall tax idea but wants to see whether more significant action is justified, given what it calls the egregious nature of Russia’s invasion.
The issue has grown in importance since $61 billion in U.S. aid to Ukraine has been blocked by the Republican-led House of Representatives. REUTERS
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