US says west closer to tapping $300bn in frozen Russian funds

The proposal comes as Washington and its G7 allies – the UK, Canada, France, Italy, and Japan – are seeking ways to urgently unlock more funding for Kiev, Yellen told the Senate Appropriations Committee on Tuesday.

According to Yellen, the US has been discussing with other G7 members the possibility of giving Ukraine a loan “allowing the windfall profits [from Russian assets] to be used” to pay it off. This approach, she said, “seems to be commanding considerable support.”

The flow of windfall profits earned on the immobilized Russian assets amounts to around $3-$5 billion per year, the treasury secretary added.

“So we’re hopeful that this can be worked into something to be presented to the leaders at the upcoming G7 meeting [in Italy in mid-June].”

The West has frozen roughly $300 billion in Russian sovereign funds since the start of the Ukraine conflict. Brussels-based clearinghouse Euroclear holds around €191 billion ($207 billion) of that amount, and has accrued nearly €4.4 billion ($4.7 billion) in interest over the past year.

The US has been pushing its allies to embrace a loan backed by income from the frozen assets that could provide Ukraine with as much as $50 billion in near-term funding, Reuters reported on Wednesday, citing a senior Treasury official.

Brent Neiman, deputy under-secretary for international finance at the Treasury, told the outlet that the proposed measure would give an immediate fiscal boost to Kiev, although there were still technical issues to be worked out.

The loan has emerged as the top option given that G7 countries remain at odds over seizing Russian assets outright.

The US had initially pushed for full confiscation of underlying assets in order to fund Ukraine’s government. However, it has since shifted towards taking only the interest amid resistance from France, Germany, and the European Central Bank, which are concerned that the euro could be affected if countries such as China start repatriating their massive foreign reserves as a precaution against possible confiscation in the future.

Russia has announced any actions taken against its assets would amount to theft and would violate international law. Moscow has warned it would respond in kind if the West went through with threats to confiscate Russian assets.