US pushing G7 members on tapping frozen Russian assets
The US and its allies will continue to seek a “firm” legal rationale to underpin plans to confiscate Russia's assets abroad, US Treasury Secretary Janet Yellen told Reuters on Thursday.
Yellen said that any such action would need an airtight legal basis, shortly after a meeting of the Group of Twenty finance ministers in Brazil, during which she failed to seal a deal to aid Kiev using Russian funds.
She noted that despite skepticism from some EU countries about asset seizure, there were ways to tap the $300 billion belonging to the Russian central bank, such as using the funds as collateral for loans. Yellen also mentioned 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, as well as domestic rationale,” Yellen said.
While the US and UK have been pushing for actions to outright seize these funds, the EU has been warning about the legal and financial implications of such a move.
At the meeting in Sao Paulo on Wednesday French Finance Minister Bruno Le Maire publicly questioned Yellen’s view that it would be legal to tap Russian funds, revealing a rift among G7 countries.
Arguing that the West doesn’t have the “legal basis to seize the Russian assets now,” Le Maire called for a more modest approach, centered on the EU’s moves to seize the interest earned from the assets held at the clearinghouse Euroclear.
Echoing his remarks, German Finance Minister Christian Lindner said that the EU was looking into “a legally secure step” to use proceeds from frozen Russian assets.
France and Germany, along with the European Central Bank, have expressed most concern that seizing the funds could negatively affect financial stability and erode trust in the euro’s status as a reserve currency.
It’s also argued that such a drastic move would set a precedent, pushing other countries to avoid holding their reserves in Western currencies in case they may one day become subject to similar sanctions.
While admitting it was critical not to put at risk the work of Euroclear, which holds most of the Russian sovereign funds, Yellen said she challenged Le Maire to help develop the workarounds sought by G7 leaders in time for their June summit in Italy.
She added that G7 members had urged their staff “to come up with as many viable options as we can, and to analyze both the benefits and costs associated with them.”
Moscow warned it would respond in kind if the West went through with threats to confiscate Russian assets. In a recent interview Finance Minister Anton Siluanov noted that Western states themselves still have equivalent assets in Russia that could be jeopardized if the frozen funds belonging to Russia are tapped.
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