Wahington: The White House on Thursday announced a proposal to allow US authorities to liquidate the assets of Russian oligarchs and donate the proceeds to Ukraine, seeking what appears to be broad new legal powers to expand America’s financial war on the Kremlin.
President Joe Biden will send the new plan to Congress as part of his broader request for aid to help the Ukrainians fight Russia’s attacks on Ukraine.
The White House has not revealed legislative text but said the proposal “would improve” the federal government’s ability to send the purposed Russian oligarch assets to Ukraine. Under current law, the US can typically only freeze — not seize or liquidate — the assets of sanctioned individuals. Civil liberties groups had raised concerned that prior congressional proposals to do so ran afoul of constitutional protections by allowing federal law enforcement to circumvent judicial procedure. It was not immediately clear how the White House would seek to change existing statute without violating those protections.
“This package of proposals will establish new authorities for the forfeiture of property linked to Russian kleptocracy, allow the government to use the proceeds to support Ukraine, and further strengthen related law enforcement tools,” the White House said in a fact sheet.
The White House said its plan was released in close coordination with the Treasury Department, State Department, and Commerce Department. Attorney General Merrick Garland previously told congressional lawmakers that he supports the efforts to repurpose seized Russian funds to Ukraine. But even some senior Biden administration officials had emphasized the need for caution around a potentially significant change in precedent to US seizure law. Treasury Secretary Janet Yellen told reporters last week that lawmakers needed to be careful when asked about a plan to give to the Ukrainians billions of dollars in seized Russian bank reserves.
“I would say that is very significant, and it is one that we would carefully need to think through the consequences of before undertaking it,” Yellen told reporters last week. “I wouldn’t want to do so lightly and it’s something that I think our coalition and partners would need to feel comfortable with and be supportive of.”
Economic campaign
The new powers sought by the White House reflect the pressure on the western allies to intensify its economic campaign against Russia over its ongoing war against Ukraine. The Biden administration’s proposal also includes a directive to make it a federal crime to “knowingly or intentionally possess proceeds directly obtained from corrupt dealings with the Russian government,” and the western allies are coordinating a response to Russia’s move to cut off natural gas to two Nato countries. The latest White House proposal also calls for improving money laundering protections and would give the US the authority to seize proceeds of attempts to facilitate the evasion of sanctions.
From the beginning, the Biden administration has led an international financial attack on those close to Russian President Vladimir Putin, including by seizing assets such as ships, luxury real estate and private aircraft. Global law enforcement has also ramped up the hunt for their assets.
The effectiveness of such measures in deterring the war and helping the Ukrainians has been less clear. The amount of Russian oligarch assets potentially available to US authorities is unknown, in part because federal law enables the oligarchs to effectively disguise their assets.
Frosen assets
The US Treasury, the administration said in the statement, “has sanctioned and blocked vessels and aircraft worth over $1 billion, as well as frozen hundreds of millions of dollars of assets belonging to Russian elites in US bank accounts.” Earlier this month, US authorities seized a 255-foot, $90 million yacht in Spain owned by Russian billionaire Viktor Vekselberg. Spanish authorities moved to freeze the vessel after the Justice Department obtained a seizure warrant seeking forfeiture in federal court in Washington, alleging US bank fraud, money laundering and sanctions violations.
These are relatively minor figures compared to the $84 billion in damages Ukraine has suffered to its civilian infrastructure alone, according to estimates by economists at the Kyiv School of Economics. Ukrainian President Volodymyr Zelensky last week said his country had so far suffered $550 billion in economic damage since Russia’s February 24 attacks. Some Russia experts have also said the oligarch sanctions could backfire by alienating Russia’s financial elite from the west and leading them to closer ties with the Kremlin.
But the administration’s move comes in response to growing congressional clamor to repurpose the Russian oligarch assets. The House passed a mostly symbolic bill Wednesday urging Biden to liquidate assets worth over $5 million belonging to those targeted with sanctions from the US government and send the proceeds to Ukraine. It cruised through with bipartisan support in a 417-8 vote.
“The question is where the jurisdiction is, and do these oligarchs have standing to protect their property,” said Ariel Cohen, a senior fellow at the Atlantic Council Eurasia Center and a member of the Council on Foreign Relations. “I’m not necessarily in favour of property being seized without due process . . . What is the source of law to seize, let alone dispose, of these assets?”
The amount the Biden administration will seek in aid to Ukraine was not immediately clear. On Monday, Ukraine’s finance minister said the country is seeking at least $5 billion per month in international emergency aid.
