REPO is now law – Time to Act - Leadership

Bob McConnell, Robert B. Zoellick
April 27, 2024

Published in Friday’s The Wall Street Journal was an important article by Robert B. Zoellick, among other things, former President of the World Bank and a member of the U.S.-Ukraine Foundation’s Friends of Ukraine Network (FOUN).

Zoellick and FOUN’s Reimagining, Reconstruction, and Recovery of Ukraine Task Force have been making the case for using the estimated $300 billion immobilized Russian reserves for a very long time – and again in FOUN’s 2024 Priority Recommendations for U.S. Assistance to Ukraine.

The package of legislation passed last week by Congress and signed by the President included the long-sought Rebuilding Economic Prosperity and Opportunity for Ukrainians Act – REPO, which urges the President to transfer those Russian reserves to a trust fund for Ukraine.

The basic need is leadership, genuine leadership from the Administration in acting and leading our Allies to do the same.  Bob Zoellick makes the case.

It is time to act.


REPO Act Lets Biden Boost Ukraine

Congress’s aid package encourages the president to seize frozen Russian reserves to support Kyiv.

Robert B. Zoellick
April 25, 2024 4:21 pm ET

Now that Congress has approved assistance for Ukraine, the Biden administration should forge a long-term economic and military plan that will sustain that country in its war of attrition.

If the U.S. continues to dribble out support, it would be making a huge mistake. American public support is likely to wane, and the Europeans are absorbed with internal debates. The nature of the war has changed—militarily, technologically and economically—over more than two years. President Biden’s reactive approach reflects his senatorial style: He waits for events, issues statements and fails to seize the initiative. Congress is giving him one last chance to be a wartime leader.

The aid package’s hidden gem is the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act, or REPO. It encourages Mr. Biden to transfer frozen Russian reserves to a trust fund for Ukraine. Members of Congress from both parties recognize that taxpayers want Mr. Biden to use an estimated $300 billion of Russian money to sustain Ukraine economically before asking Americans to pay more. The administration has hesitated to take this step but must do so now.

After Russia invaded in February 2022, U.S. and European government lawyers initially resisted using the international law of countermeasures to transfer frozen Russian assets held around the world to Ukraine. Since then, international lawyers in Belgium, France, Germany, Japan, the Netherlands, the U.K. and the U.S. have argued for such transfers. Among them are Hélène Ruiz Fabri, a former head of the European Society of International Law; Harold Koh, a former State Department legal adviser and dean of Yale Law School; and Laurence Tribe, a Harvard scholar of constitutional law. Mr. Biden must tell the Europeans that they’ve run out of legal excuses for not meeting Ukraine’s needs.

Last year Treasury Secretary Janet Yellen justified inaction by raising concerns about how such transfers might affect the value of the dollar and the euro. But two years after freezing the Russian reserves, the dollar is stronger and the euro is fine—in part because the alternatives are poor. China’s yuan isn’t a trustworthy reserve asset. The world would be safer if countries realized that their foreign reserves would be imperiled if they invade the neighbors.

Ms. Yellen has become an advocate for Ukraine, but she faces another test. Washington now excuses its timidity by saying it can transfer only around $5 billion of Russia’s reserves held here. The Biden administration has ignored that another $71 billion of Russian reserves held in Euroclear, an international financial clearing and settlement service in Belgium, are invested in U.S. and Canadian dollars or British pounds. The worldwide total in these currencies is estimated to be worth more than $100 billion. All three countries say they want the Group of Seven to transfer those reserves to Ukraine. Australian dollars would add the equivalent of another $6 billion. Japan might help once it sees the deterrence benefits of showing China that an aggressor can’t expect to rely on G-7 currencies.

The U.S. Treasury has asserted sovereignty over dollars used by sanctions violators, terrorists, drug traffickers, money launderers and hostile states around the world. International banks have had to pay tens of billions of dollars in penalties. America isn’t alone. Britain and Canada have reached across borders to reach tax cheats in offshore havens. With the REPO Act, Congress told the Biden administration not to let Russia escape justice by parking dollars in Europe. REPO requires U.S. financial institutions to report any Russian state assets in their accounts that are subject to sanctions. To transfer offshore dollars, a financial institution must work through a U.S. correspondent bank account. This enables the U.S. to exert authority over overseas assets.

Until now, the Biden administration has let Europe dither. Washington is working on a plan to offer Ukraine a modest loan based on the interest from frozen Russian assets. Washington, London and Ottawa should instead transfer all the frozen Russian assets in their currencies worldwide to a trust fund for Ukraine while urging Europeans to act when they can agree. If Europeans won’t use Russian assets, they can’t expect others to keep paying. After all, the war is in Europe.

Berlin and Paris have been the principal obstacles. Washington can assuage their anxieties. Some Germans mistakenly expect they will be able to resume business as usual in Russia after the war, so they fear that Vladimir Putin will seize their assets. But in some cases, Mr. Putin already has done so. The G-7 could set aside $10 billion of Russian reserves for a fund to pay claims for such illegal seizures. Paris apparently has been rattled by Saudi and Chinese threats not to buy French bonds. The French Treasury should be reassured that other investors—and if need be European institutions—will buy its bonds if Beijing or Riyadh attempt such intimidation. Let the Saudis buy Chinese bonds. Emmanuel Macron should recognize that France will never be a European leader if it caves in to such bluffing.

Mr. Biden also should use Congress’s aid package to transform military and intelligence support for Ukraine. In addition to supplying ammunition, the U.S. must build a pipeline backed by industrial capacity that can outlast the pooled resources of Russia, Iran and China. Ukraine will need investments in critical capabilities at home. Kyiv needs arms that can destroy Russia’s logistical networks and at least establish equivalence in the sky and cyberspace.

U.S. leadership would be welcomed by Central and Eastern Europeans, the Baltics, Nordics and some in Brussels. In every European security crisis for more than 70 years—Berlin in the 1960s, Euromissiles in the ’70s and ’80s, the unification of Germany and Europe in 1989-90, the Balkan wars—the U.S. had to push for allied action. During Mr. Biden’s decades in the Senate, he yearned to lead, not just talk about foreign policy. Now is his moment.

Mr. Zoellick served as U.S. trade representative (2001-05), deputy U.S. secretary of state (2005-06), and World Bank president (2007-12). He is the author of “America in the World.”

Co-Founder, U.S.-Ukraine Foundation
Director of External Affairs, Friends of Ukraine Network

The introduction is Mr. McConnell’s and does not necessarily represent the views of
the U.S.-Ukraine Foundation or the Friends of Ukraine Network (FOUN).