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How G7 could reshape the REPO Act

FRANKFURT, GERMANY — Treasury Secretary Janet Yellen says the U.S. government is prepared and willing to start seizing Russian sovereign assets to aid Ukraine.

But the need to move in lockstep with European allies is changing how U.S. authorities are thinking about their own strategy in the near-to-mid-term.

“We’ve not taken that off the table, and we do think it’s justified,” Yellen told us in an interview en route to Europe, referring to sovereign asset seizure. “But I think we may have found a way to do this that gives us a lot of resources for Ukraine that can command consensus.”

As we’ve written already this week, Treasury officials headed to the G7 Finance Ministers’ conference are focused on rallying E.U. leadership behind a plan that stops short of asset seizure. Some G7 nations would prefer to securitize the interest earnings of frozen Russian assets to fund a larger loan that could further back Ukraine.

Yellen said the REPO Act, which Congress passed alongside the most recent foreign aid package, gives the White House broad discretion on whether and how sovereign assets are handled.

“The REPO Act doesn’t require seizing assets. It allows the assets to be seized,” the Treasury secretary said.

News: The lawmakers who authored the REPO Act are already putting pressure on the Biden administration for an implementation plan.

In a letter to President Joe Biden, the bipartisan group asked for specific information about how the law is being rolled out, including:

Whether financial institutions have formally informed Treasury about Russian assets they’re currently holding.

A briefing from the National Security Council, which is leading the administration’s coordination efforts with European nations and G7 partners. This includes funding “creative mechanisms” for using the frozen Russian assets in their countries.

Whether Treasury has “engaged with central banks, regulators, and repositories in partner jurisdictions — in particular, the National Bank of Belgium, the Belgium Financial Services and Markets Authority, and Euroclear — on the concept of confiscating Russian sovereign assets.”

Sens. Jim Risch (R-Idaho) and Sheldon Whitehouse (D-R.I.), along with Reps. Michael McCaul (R-Texas) and Marcy Kaptur (D-Ohio), signed the letter. The lawmakers said Russia needs to know that the United States is “serious” about asset seizure.

“Russia shows no signs of relenting on its illegal military campaign or engaging in multilateral talks, so the time to act is now,” they wrote.

We asked Yellen: Will G7 conversations this week shape the law’s U.S. implementation? Yellen responded in part by pointing to the New York Fed, which plays a key role in holding Russia’s sovereign assets located in the United States.

For the record: The Treasury secretary argued this wouldn’t be a weaker approach to harnessing Russian assets so much as an alternative approach to that same goal.

“It’s a simple step to make loans that are backed by the stream of revenues on those assets,” Yellen told us. “In terms of a workable idea that can generate a significant set of assets that could be repeated — if we take several years of proceeds, make a loan against it, that’s something that can be repeated again in the future.”

— Brendan Pedersen and Andrew Desiderio

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Editorial photos provided by Getty Images. Political ads courtesy of AdImpact.