Ice cream and confiscation are two different things
Ukrainian president Volodymyr Zelensky has estimated that restoring the country’s territory after the fighting could require as much as 600 billion dollars, underscoring the scale of reconstruction costs. The reminder to focus on the road ahead and fund the necessary work is a constant backdrop to the debate about postwar rebuilding.
Recent statements from the finance ministers of Estonia, Latvia, Lithuania, and Slovakia call on the European Union to explore ways to finance Ukraine’s city and town reconstruction using frozen assets held by Russia’s central bank. The logic is straightforward: Russia should be held responsible for the damage caused by its actions and contribute to repairing the harm it has inflicted.
Confiscating Russian assets has been a recurring theme at the forefront of global economic discussions. This month, the top economic officials of the G7 acknowledged the idea, and the proposal has found support from Germany and Canada, according to the reporting on the matter.
Yet the United States, which has led the charge to isolate Russia through sanctions, has shown more caution. The administration is weighing whether to participate in efforts to seize assets such as dollars and euros tied to Russia. A New York Times report notes that only a portion of these assets is held in the United States, with many funds parked in European institutions, including the Bank for International Settlements in Switzerland.
The reporting highlights that freezing funds prevents the Russian government from spending them on any ongoing military operation in Ukraine. Still, the nuance remains: freezing and actually recovering or using the money are not the same thing, legally or practically.
Officials in the Biden administration have spoken privately about the issue, with some expressing that a final decision has not been made. One unnamed official suggested that it could be both legitimate and beneficial to release funds to support Ukraine’s reconstruction, but they warn about the precedent such a move would set for the United States as a safe repository for assets around the world. This possibility raises deep concerns about future financial security and sovereignty.
A representative from the U.S. Treasury has stated that under U.S. law, asset seizure is possible if the President determines that a country has attacked the United States or directly participated in hostilities. Several experts, however, point to historical precedent such as the broader powers exercised by the U.S. president after the events of September 11, 2001, suggesting that exceptional measures could be invoked in extreme circumstances. Some observers even speculate about using cyber tools to justify the seizure of Russian central bank holdings in a crisis scenario.
The legality of confiscation
At a recent G7 gathering, Jennet Yellen, the head of the U.S. Treasury, indicated that U.S. law does not provide a straightforward path to seizing detained Russian property for Ukraine. The legal framework remains a major hurdle, with competing national interests and international law considerations complicating any unilateral action.
Given the extensive destruction in Ukraine and the vast reconstruction costs, many see it as reasonable for the United States and its allies to seek Russia’s financial accountability. The question, though, is how much and under what terms should Russia contribute to the rebuilding effort while maintaining legal clarity and international stability.
There is concern that seizing foreign exchange reserves could erode trust in the dollar as a global reserve, potentially encouraging other countries to diversify their holdings away from the United States. The international balance of risk and reward remains a critical factor for policymakers as talks about Russia-Ukraine dynamics continue. If negotiations resume, the possibility of applying significant sanctions tied to seized assets may be limited by the need to preserve strategic levers and avoid undermining broader economic stability.
Since Russia’s military actions in Ukraine began, Western partners have frozen more than 300 billion dollars of the Russian Central Bank’s foreign exchange reserves, with roughly half of the total currently blocked. Russian president Vladimir Putin has described Western measures as theft and warned that such moves do not benefit any party in the long run. The global financial system is watching closely as policymakers weigh the path forward and the potential consequences for international finance and security.