Janet Yellen: A new way to make Russia’s assets pay for Ukraine’s defense and rebuilding

By Janet Yellen

We are at a critical time in Russia’s brutal and illegal invasion of Ukraine. Russia’s continued assault on the country requires that we take bold and decisive action. It is time for the United States and our allies to unlock the value of immobilized Russian assets so that Ukraine can get the financial support it urgently needs.

The United States and our global coalition including the Group of 7, Europe and countries around the globe are engaged in a battle of wills with Vladimir Putin. As Russia continues to move to a permanent war footing and Ukraine faces a sizable future funding gap, Mr. Putin is betting that he can wait out the coalition until Ukraine runs out of money and bullets.

Each day Russia’s aggression continues, it threatens Ukraine’s sovereignty, our collective security and the rules-based international order that underlies the strength of the global economy and the international financial system.

Since Russian troops first amassed on the Ukrainian border, the United States and our Group of 7 counterparts have levelled sweeping multilateral sanctions to deprive Russia of money and military equipment to fuel its aggression. We have equipped Ukraine with weapons, equipment and financial support.

At the start of the war, we also immobilized approximately $280 billion of Russia’s sovereign assets held in our financial institutions so that they cannot be used to fuel Putin’s war of choice. We agreed that these assets would remain immobilized until Russia pays for the damage it has caused.

A majority of these assets now sit at a financial institution in Belgium. They are generating several billion dollars in revenues each year, to which Russia has no legal claim. The European Union has agreed to direct these “windfall” earnings to support Ukraine, and I applaud this plan. But this will not be sufficient to meet Ukraine’s immediate and future needs. So the United States has worked with our allies to build on Europe’s plan and go further.

We propose a loan that would get Ukraine a decisive amount of funding. The loan would be paid off by the earnings over time. The funds this loan would provide would equip Ukraine with the resources it needs to defend itself and to rebuild — paid for by the proceeds earned from Mr. Putin’s own assets.

Our proposal would send a clear message to Mr. Putin that we are in it for the long haul: He cannot outlast Ukraine and our coalition. It is consistent with domestic and international law. And it would not foreclose taking additional actions on these assets together with our partners in the future.

The United States and our allies made important progress on our proposal, including at the Group of 7 Finance Ministers and Central Bank Governors meeting last month and thanks to President Biden’s leadership. This week’s Group of 7 summit is a crucial opportunity for leaders to endorse this proposal and provide added momentum to our efforts to get Ukraine the resources to defend against Russia’s aggression.

(Janet Louise Yellen is an American economist serving as the 78th United States secretary of the treasury)