March 18, 2022 | Policy Brief

U.S. Should Seize and Sell Assets of Sanctioned Russian Elites to Aid Ukraine

March 18, 2022 | Policy Brief

U.S. Should Seize and Sell Assets of Sanctioned Russian Elites to Aid Ukraine

A bipartisan group of senators introduced legislation on Tuesday that would enable Washington to seize and sell assets of sanctioned Russian elites and then use the proceeds to support Ukraine. As Washington ramps up sanctions against Russian elites, this legislation would help put their frozen assets to good use.

The Asset Seizure for Ukraine Reconstruction Act, introduced by Senators Roger Wicker (R-MS), Sheldon Whitehouse (D-RI), Lindsey Graham (R-SC), and Richard Blumenthal (D-CT), mirrors similar bipartisan legislation introduced in the House earlier this month. The two bills would allow the U.S. government to seize assets belonging to foreign persons who are under U.S. sanctions related to human rights violations, corruption, Russia’s “malign influence,” or its conflicts in Ukraine, and whose wealth derives at least partly from corruption or political support for Vladimir Putin’s regime.

The United States could then sell those assets and use the proceeds to support Ukrainian refugees, humanitarian assistance, and post-conflict construction in Ukraine, as well as “democracy and human rights programming and monitoring” for the Russian people. The money could also fund “weapons” for the Ukrainian military and help “ensure the free flow of information to the Ukrainian people.”

Under current U.S. law, funds belonging to sanctioned persons are frozen in their accounts, while physical assets such as real estate or yachts are put under lock and key. The government cannot access these assets absent a separate legal authority, which usually entails linking them to criminal activity. This process is often exceedingly difficult and can take years. By contrast, sanctions designations require a much lower burden of proof.

Since Russia invaded Ukraine, Washington and its allies have sanctioned a raft of Russian oligarchs and officials. Assets frozen as a result — such as a $588 million superyacht belonging to EU- and UK-sanctioned billionaire Andrey Melnichenko, impounded by Italy last Saturday — are now unusable by their owners but still legally their property.

The new legislation would thus make it easier to access frozen Russian assets subject to U.S. jurisdiction, such as luxury real estate, which Russian elites have long used to stash wealth. A similar proposal is under consideration in the United Kingdom, whose capital has earned the moniker “Londongrad” because it has long been a favorite destination for Russian elites and their money. Some estimates suggest Russian elites could hold close to $1 trillion offshore in various locations worldwide.

These initiatives dovetail with a new “Russian Elites, Proxies, and Oligarchs” multilateral task force launched by Washington and various allies on Wednesday. According to a Treasury Department press release, the task force aims to help the allies “share information to take concrete actions, including sanctions, asset freezing, and civil and criminal asset seizure, and criminal prosecution.” The Justice Department launched a complementary initiative on March 2 called “Task Force KleptoCapture.”

Yet Congress could still bolster these efforts in several ways. First, the Senate and House versions permit the seizure of assets worth at least $2 million and $5 million, respectively. Congress should drop the dollar-value threshold, thereby putting at risk all U.S. assets of qualifying persons.

Second, lawmakers should adjust the legislation’s weapons-related language to authorize the use of funds for materiel other than “weapons,” such as body armor and radios. Moreover, that provision should explicitly apply to any Ukrainians fighting Russia within Ukraine, including irregular forces, not merely to Ukraine’s official military.

Finally, the legislation should apply to qualifying persons subject to any Russia-related sanctions. When designating Russian oligarchs and other elites, Treasury has often provided very specific justifications — such as the target’s operations in Russia’s technology sector — that may not qualify for asset seizure under the current legislation.

The Ukrainian people’s bravery and resilience have inspired the world. But with the worst of the war likely yet to come, Washington must do more. It can start by using money seized from Putin’s cronies to aid Ukrainians fighting his aggression.

John Hardie is research manager and a research analyst at the Foundation for Defense of Democracies (FDD), where Matthew Zweig is a senior fellow. They both contribute to FDD’s Center on Economic and Financial Power (CEFP). For more analysis from the authors and CEFP, please subscribe HERE. Follow Matthew on Twitter @MatthewZweig1. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research center focused on national security and foreign policy.


Russia Sanctions and Illicit Finance