Stay up to date with free updates
Simply sign up for the War in Ukraine myFT Digest – straight to your inbox.
Western nations are actively looking for ways to seize Russian central bank assets to finance Ukraine as political disputes in the US and Europe threaten their financial support.
G7 officials have intensified talks in recent weeks about spending some of the roughly $300 billion in immobilized Russian state assets, a radical move that would open a new chapter in the West's financial war against Moscow.
The move comes as two key financial aid packages for Ukraine worth more than $100 billion stalled this week as Republicans in the U.S. Congress and Viktor Orbán of EU member Hungary opposed funding for Kiev.
The confiscation of Russian assets could provide an alternative source of financing for Kiev, especially given the expected huge costs of post-war reconstruction.
But so far, G7 governments have largely resisted such a move, fearing that some foreign investors would flee into dollar and euro assets.
Although Washington has never publicly supported the seizure, the US has taken a more forceful stance privately in recent weeks, arguing in G7 committees that there is a way to seize the assets “in accordance with international law.”
“G7 members and other particularly affected states could seize Russian state assets as a countermeasure to persuade Russia to end its aggression,” says a US government discussion paper, which was obtained by the Financial Times and distributed to the G7 committees became. The US Treasury Department declined to comment.
A US official said Washington is in active discussions about the use of Russian state assets and believes the time frame for a decision is short. They suggested discussing this at a possible meeting of G7 leaders to coincide with the second anniversary of Russia's full invasion of Ukraine in February.
The EU proposals have so far been limited to confiscating Russian assets themselves, instead aiming to skim profits made for financial institutions such as Euroclear, which holds state assets worth 191 billion euros.
But calls to use the assets themselves are growing louder as cracks have formed in the political consensus on additional funding for Ukraine. Aid packages worth $60 billion or €50 billion in Washington and Brussels failed to receive approval this week.
Lord David Cameron, Britain's foreign secretary, expressed confidence that there is “a legal way” to seize the assets and suggested the UK could work with the US if other G7 allies cannot be persuaded.
“Extraordinary times require extraordinary measures,” he told a British parliamentary committee on Thursday, adding that he was “strongly” supporting the proposal within the G7.
He denied there would be a “chilling effect” on foreign investment and insisted investors, who were likely to feel uneasy, were already “quite deterred by the fact that we have frozen the assets”.
The U.S. official said the G7's legal discussions reflect the importance of adhering to international law in responding to Russia's invasion. The goal in the coming weeks is to clarify all critical questions so that the G7 can move forward together.
European countries, particularly Germany, France and Belgium, have been reluctant to take such a step, citing legal concerns such as the protection that state assets enjoy under international law. The majority of Russia's state assets, amounting to 300 billion euros, are located in Europe.
Recommended
Still, a Western official said there were “definitely live discussions” within the G7 and a “growing consensus” in favor of using Russian state assets for Ukraine.
“It's back to the question: Is it solely up to Western citizens and state coffers to pay for the war, or should the Kremlin also be on the hook?”
The US paper argued that Russia's invasion of Ukraine meant that asset seizure “could be pursued as a lawful countermeasure by those states particularly affected by Russia's violation of international law.”
“We have to find a way to get cash into Ukraine in whatever form it takes,” said an EU diplomat involved in the failed summit negotiations this week. “And more and more countries are pointing at the assets and wondering why they are still there.”