The US Justice Department has handed almost $500,000 in forfeited Russian funds to Estonia, from where the money will be used to help repair Ukraine’s power grid. The transfer was the first of its kind, and effectively used Estonia as a middleman to skirt US laws forbidding a direct donation to Ukraine.
The money was used by a Latvian machining and welding company to purchase a jig grinder from a Connecticut-based firm in 2018, before a group of Latvian and Ukrainian smugglers attempted to move it into Russia, in violation of US export restrictions, the Justice Department said in a statement on Saturday.
The device – which can be exported to the EU but not elsewhere due to its “applications in nuclear proliferation and defense programs,” was intercepted by the US and Latvian authorities before it reached Russia, the department stated. A Latvian man was arrested in 2022 and extradited to Connecticut, where he pleaded guilty to violating export controls last week.
In a joint briefing at the Munich Security Conference on Saturday, US Deputy Attorney General Lisa Monaco and Estonian Secretary General Tonis Saar announced that the $484,696 used to purchase the machine had been transferred to the Estonian government. Estonia will use the money to finance a drone-based program to assess damage to the Ukrainian power grid, they said.
“This transfer is the first of its kind from the United States to a foreign ally for the express purpose of assisting Ukraine,” the Justice Department’s statement said. “The confiscated funds are being transferred to Estonia since under current authorities, the facts of this case do not allow for a direct transfer to Ukraine.”
The US has previously used $5.4 million in forfeited funds to finance a State Department program to support Ukrainian military veterans, but until now has not sent any confiscated Russian cash abroad.
The transfer of frozen funds is separate to the use of Russian central bank assets to finance Ukraine’s war efforts. Roughly $300 billion worth of the Bank of Russia’s foreign currency reserves have been frozen in the West since 2022, and officials in Washington and Brussels have pledged to seize this cash and give it to Kiev. However, no legal mechanisms to do so currently exist.
Lieve Mostrey, the CEO of the Brussels-based clearinghouse Euroclear, warned this week that seizing these assets would undermine trust in Western markets, while the Russian Foreign Ministry warned that any confiscation would amount to “theft,” and would trigger an “extremely harsh” response from Moscow.