Treasury Secretary Janet Yellen voiced support for a European Union plan to impose a windfall tax on profits generated by frozen Russian sovereign assets, calling it a “sensible” way to help finance the reconstruction of Ukraine.
“This seems like a reasonable proposal,” Yellen said in an interview with Bloomberg reporters and editors in New York on Wednesday, adding that the U.S. is discussing the idea with the EU. “It’s a different thing than seizing the assets.”
The Biden administration has come under pressure to seize the funds outright, something Yellen has said would be illegal under current law. The EU’s legal service reached a similar conclusion, which led to the alternative idea of taxing the profits earned on the frozen funds.
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Opening the way to tap profits from Russian funds for Ukraine’s benefit may help boost support for continued aid to Kyiv as the war drags on. The Biden administration is pushing Congress to approve an additional $24 billion in assistance but facing growing skepticism from some Republicans.
Yellen and other U.S. officials have weighed endorsing the proposal to help unlock the debate over it in Europe, according to a person familiar with the matter.
European Central Bank President Christine Lagarde has been critical of the measure, warning that it could threaten the euro zone’s financial stability and the liquidity of the common currency. The ECB chief and several EU member states have indicated Europe shouldn’t go it alone, saying support from the U.S. and the Group of Seven is essential for moving forward. The EU’s executive arm is aiming to formally propose the measure in the coming weeks, other people said. The people asked not to be identified discussing the evolving situation.
On Capitol Hill, legislation authorizing the Biden administration to seize the Russian assets outright is getting more attention. Passing a bill that would let the president seize Russian sovereign assets held in the U.S. and appropriate them for reconstruction costs is seen as a way to relieve some of the political pressure lawmakers are feeling back home on the cost of continued aid to Ukraine, according to several people.
“We’re still working to build support,” said Senator Sheldon Whitehouse, a Rhode Island Democrat who is a cosponsor of the measure introduced by Senator Jim Risch of Idaho, the top Republican on the Foreign Relations Committee. Giving the president authorization to seize the assets would be a “push” to move the administration closer to taking the action, he said.
“Simple propositions of justice suggest that Russia should contribute to the reconstruction of Ukraine,” he said. Backers have been working with the White House to try to resolve administration concerns about the bill, which it fears it might set a precedent that could alarm other nations who keep government money in U.S. accounts.
Former Treasury Secretary Larry Summers said Tuesday that the move to seize the assets outright was “compelling on moral grounds, compelling on economic grounds, compelling on political grounds and compelling on effectiveness grounds.”
He also said that the Biden administration already has legal authorization to seize the funds under the president’s emergency powers and made reference to a nearly 200-page paper authored by legal scholar Laurence Tribe, among others, that lays out the justification for that conclusion. Summers is a Harvard University professor and a paid contributor to Bloomberg TV.
Most of the frozen Russian central bank assets — now more than €200 billion ($219 billion) — are held in Europe, with the bulk most of them at settlement giant Euroclear Ltd. in Belgium, where they generated some €1.7 billion in income during the first half of 2023.
— With assistance from Viktoria Dendrinou and Christopher Condon
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