Russian frozen assets "ought to" be used to rebuild Ukraine, says US special envoy

Russian sovereign assets frozen by the West “ought to” be used for Ukraine’s post-war recovery, US President Joe Biden’s special representative for the country’s rebuilding has said, backing one of Kyiv’s central demands.

Western countries froze $300bn worth of Russian sovereign assets in response to the full-scale invasion of Ukraine in February last year, Financial Times reports.

Some countries have called for this money to be used to provide funding to Kyiv as a contribution to its vast reconstruction costs, but other stakeholders — including the European Central Bank — have voiced caution about the legality and ramifications of such a move.

Penny Pritzker, who was appointed by Biden as special representative for Ukraine’s economic recovery this month, said that there was “extraordinary work going on by legal teams to understand what is possible” to do with the assets.

“Fundamentally, if I were to say not from a legal standpoint, but from an ethical and moral standpoint, given the destruction that the Russians have caused to Ukraine, you know, they ought to be contributing to the recovery of Ukraine,” Pritzker told reporters on Wednesday. “Legally, how one gets that done is something that’s being worked on.”

Pritzker said the US had frozen $8bn worth of Russian sovereign assets, with the bulk in the EU and Japan.

Kyiv has long called for a mechanism to leverage the funds, as both a direct contribution and a way to encourage other pledges of assistance from governments and private investors.

Legislation has been introduced in the US Senate that would authorise Biden to seize Russian sovereign assets and transfer them to Kyiv for the long-term reconstruction of Ukraine. But there are doubts at the top of the US and EU administrations over the viability of doing so, which has made it difficult for Western allies to settle on a plan.

EU experts are meeting on Wednesday to discuss options, amid pressure from some members to agree on a mechanism to transfer profits, including interest payments, from the frozen assets. A three-step plan under discussion would involve first immobilising those funds and setting them aside, before using them for Ukraine later on.

Erki Kodar, Estonia’s under-secretary for legal and consular affairs, said it was unclear when a concrete proposal would be made by the European Commission, as the legal risks were being discussed.

“If you want to drown something out then give it to the lawyers,” Kodar said. “We need to task our heads of state and government to ask and demand for results on this matter.”

Estonia has been among those member states calling for a rapid agreement to use Russia’s central bank assets, and to seize not only their proceeds but the assets in full.

“There are legal risks in whatever we do, whether we try to take the Russian central bank assets and give them for Ukraine’s reconstruction, whether we use only the profits, interests accrued from those funds . . . And there’s also a legal risk involved in not doing anything,” Kodar added.