Washington’s prospects for securing multicountry support to seize Russian assets to support Ukraine could be tested in three weeks at a meeting of G7 leading industrialized nations.

U.S. lawmakers, officials and experts are hopeful that if the G7 finance ministers and central bankers can agree at the May 24-25 meeting in Stresa, Italy, on a plan for confiscating the sovereign Russian financial assets in their respective jurisdictions, it could finally unlock the collective political will needed to do so. 

“We need to act together on this, and that’s always been envisioned,” Senate Foreign Relations ranking member Jim Risch said in an interview last week. “I’ve had numerous conversations with our allies and friends on this. Everybody wants to get this done. The devil’s always in the details.”

Congress authorized President Joe Biden to confiscate billions of dollars in frozen Russian currency reserves in the national security supplemental and transfer them to a fund for Ukraine’s reconstruction, as well as economic and humanitarian assistance to the besieged nation. But only an estimated $5 billion, a small fraction of Russia’s total global currency reserves, is held in the United States.

The vast majority of the approximately $300 billion in frozen reserves is held in financial institutions in Western Europe, where governments and the institutions themselves thus far have been more hesitant than Washington about seizing the assets for fear of legal and financial retaliation by Moscow and of destabilizing their own banking sectors.

France, Germany and the European Union are expected to be the parties most in need of convincing.

Risch, R-Idaho, and House Foreign Affairs Chairman Michael McCaul, R-Texas, both authored bills that formed the basis for the provision in the national security supplemental law, which also requires the president to establish an international mechanism to compensate Ukraine for the harm caused by Russia. That directive is expected to be tricky to implement.

Paris’ finance minister has argued that seizing Russian assets would violate international law, while the European Central Bank has said it could harm other foreign investors’ confidence that their own assets will be safe in the EU’s financial system. And Berlin and Tokyo are worried that using Russian reserves to rebuild Ukraine could set a precedent for the seizure of their own foreign-based assets to fund World War II reparations.

Rather than seizing all of Russia’s roughly $300 billion currency reserves and giving it to Ukraine, EU leaders have proposed highly taxing the interest earned from those assets, estimated to yield $3 billion annually, and using it to buy weapons for Ukraine.

“The long and the short of it is that the Europeans have an economic concern, a financial concern, but they’ve expressed it as a legal concern, but the legal concern I think is not legitimate,” Harold Hongju Koh, who was the legal adviser to the State Department during the Obama administration, said in an interview. “They’ve been hiding behind a claim of illegality, which doesn’t hold up. The heart of that claim is that you have to respect the sovereign immunity of [Russian President Vladmir] Putin’s central bank assets even though he has blatantly violated the sovereignty of Ukraine.”

The Belgian clearinghouse Euroclear is estimated to hold nearly $200 billion of the immobilized Russian reserves. Euroclear says 16 percent of that amount is in British pounds, 9 percent in Canadian dollars and 8 percent in U.S. dollars. Almost all of the remaining reserves are in euros.

Since the United Kingdom, Canada and the U.S. are on board with the G7 transferring the Russian reserves to Ukraine, they shouldn’t wait for the European holdouts to agree before acting, argued Robert Zoellick, a former U.S. trade representative and deputy secretary of State during the George W. Bush administration, in a late April op-ed for The Wall Street Journal.

“Washington, London and Ottawa should instead transfer all the frozen Russian assets in their currencies worldwide to a trust fund for Ukraine while urging Europeans to act when they can agree,” said Zoellick, who also led the World Bank.

‘The objective is the same’

Treasury Secretary Janet L. Yellen last month said the Biden administration was considering multiple options “ranging from actually seizing the assets to using them as collateral” for loans to benefit Ukraine.

“Everybody is cautious,” Risch said, noting that when he and others in the U.S. began exploring the idea in 2022, very few others were on board. “When we started this, nobody would even get involved. The thing has come a long, long way since then.”

Risch said he has spoken with German Chancellor Olaf Scholz about the matter on multiple occasions and that while the Europeans have some different ideas for approaching the issue, “the objective is the same and the result is the same, so I don’t care how we do it, it’s just a matter of getting it done.”

While the U.S. has much less exposure to financial retaliation from Russia than Europe does, critics warn there could still be unintended consequences for U.S. national interests.

For one thing, seizing sovereign Russian assets could send a bad signal to other non-Western-aligned countries about the safety of their own foreign currency reserves in U.S. financial institutions and could undermine the dollar’s position as the dominant global currency.

“The dollar is probably the most valuable strategic asset the United States has. We exercise a degree of control over the world economy because the world, for trading purposes, allows its transactions to pass through our currency,” wrote Christopher Caldwell, a contributing editor at The Claremont Review of Books, in an April op-ed for the New York Times. “It gives us leeway to run up debt ($34 trillion of it so far) that other countries lack. If Russia, China and other diplomatic rivals were to decide that their dollar assets were vulnerable and that they could no longer trust the dollar as a means of exchange, we would feel the pain of that $34 trillion in debt in a way that we don’t now.”

But Koh, now a professor of international law at Yale Law School, said there might be a useful deterrent message to countries like China about the economic fallout for invading its neighbors.

“I think that is a good reason to do it, not to not do it,” he said. “In such a situation, this would be the main piece of leverage that you’ve got” to dissuade China from attacking Taiwan.

Furthermore, seizing Russia’s assets could send an important message now to Moscow about unified Western resolve to remain behind Ukraine at a time when Putin is calculating that elections this year in Europe and the U.S. could bring to power leaders who would be more accommodating to the Russian leader.

“This is not a legal problem. It is a question of political will, and politicians shouldn’t hide behind insubstantial international law arguments,” Koh said. “The question is, do they have the courage to do what is necessary at this urgent moment.”