Elvira Nabiullina’s New Best Friend? Janet Yellen, Who May Block Using Russia Central Bank Assets To Compensate Ukraine And US Taxpayers. Would Attack By Iran On Israel Be Treated Same?
Chairwoman of the Central Bank Of The Russian Federation Elvira Nabiullina’s New Best Friend? Janet Yellen, U.S. Secretary Of The Treasury, Who May Block Using Sanctioned Russian Federation Central Bank Assets To Compensate Ukraine And U.S. Taxpayers. Would An Attack By Iran On Israel Be Treated The Same?
According to Janet Yellen (75), United States Secretary of the Treasury, the process for sanctioning (freezing) assets of the Central Bank of the Russian Federation and individuals of Russian descent is permitted using executive orders authorized by The White House. The value of Central Bank of the Russian Federation assets in the United States is approximately US$40 billion of the approximately US$340 billion in assets of the Central Bank of the Russian Federation and approximately US$200 billion to US$240 billion in private assets held (now frozen) outside of the Russian Federation. Ms. Yellen (Akerlof) was Vice Chair of the United States Federal Reserve from 2010-2014 and Chair of the United States Federal Reserve from 2014 to 2018.
Approximately US$315 billion in Central Bank of the Russian Federation assets are held (frozen) outside of the Russian Federation: Germany (US$96 billion), France (US$60 billion), Japan (US$57 billion), United States (US$40 billion), United Kingdom (US$31 billion), Austria (US$15 billion), and Canada (US$16 billion). Approximately 34% of the assets are in Euros; 22% in Gold Bullion; 17% in Chinese Yuan; 11% in United States Dollars, and 6% in British Pounds.
Estimates of the damage inflicted since 24 February 2022 by the armed forces of the Russian Federation to the infrastructure in Ukraine are approximately US$500 billion.
Adding to this half a trillion dollars will be damages on behalf of individuals and companies and organizations from court judgements in civil lawsuits and in criminal convictions.
And the lawsuits from governments of countries who have been impacted by displacements of nearing 8 million Ukraine nationals- Hungary, Moldova, Poland, Romania, and Slovakia.
And the lawsuits from governments of countries who have contributed currency, humanitarian assistance, and weapons to Ukraine. For United States taxpayers, from 24 February 2022 through the end of the year, the total value may reach US$100 billion- every penny of which will be borrowed with accruing annual interest. The United States Department of the Treasury will market Treasury Bills to the private sector and to governments. The US$100 billion will be added to the annual United States government spending deficit which in turn will be added to the United States government (taxpayer obligated) debt- currently US$30.4 trillion.
Members of the United States Congress have identified themes from which to inspire ideas for the United States government, and for other country governments, to seek reparations from the government of the Russian Federation (primarily through the use of the approximately US$340 billion in frozen assets of the Central Bank of the Russian Federation) and from the estimated US$200 billion to US$240 billion in assets of selected Russian Federation nationals defined as “oligarchs” for what could total US$500 billion in infrastructure damages inflicted since 24 February 2022 by the armed forces of the Russian Federation upon Ukraine.
The process for seizing assets that have been sanctioned (frozen), liquidating those assets, and directing the resulting funds toward the reconstruction of Ukraine and reimbursement of funds provided by United States taxpayers may require legislation to be introduced in the United States Congress, voted upon by members of the United States House of Representatives and the United States Senate, and then signed into law by Joseph Biden, President of the United States. According to Secretary of the Treasury Janet Yellen, “I am unclear whether or not it would be possible without legislation authorizing the use of those assets.”
The United States government authorized previously-seized assets held by United States-based financial institutions to satisfy court judgements filed by plaintiffs against the Republic of Cuba. Rather than use previously-seized assets held by United States-based financial institutions and by the United States government to satisfy lawsuits and court judgements against the Islamic Republic of Iran, the United States government used United States taxpayer funds to compensate United States nationals.
There is an exception to the Foreign Sovereign Immunities Act of 1976 which permits states (countries, nations) to be held liable for acts of state-sponsored terrorism. To date, the Russian Federation has not been designated by the United States Department of State as a State Sponsor of Terrorism.
“Countries determined by the Secretary of State to have repeatedly provided support for acts of international terrorism are designated pursuant to three laws: section1754(c) of the National Defense Authorization Act for Fiscal Year 2019, section 40 of the Arms Export Control Act, and section 620A of the Foreign Assistance Act of 1961). Taken together, the four main categories of sanctions resulting from designation under these authorities include restrictions on U.S. foreign assistance; a ban on defense exports and sales; certain controls over exports of dual use items; and miscellaneous financial and other restrictions. Designation under the above-referenced authorities also implicates other sanctions laws that penalize persons and countries engaging in certain trade with state sponsors. Currently there are four countries designated under these authorities: Cuba [off in 2015, on again in 2021], the Democratic People’s Republic of Korea (North Korea), Iran, and Syria.”
According to Secretary of the Treasury Janet Yellen, “That is very significant step, and it’s one we would carefully need to think through the consequences of before undertaking it. I wouldn’t want to do so lightly.” United States allies and partners would “need to feel comfortable with and be supportive of” the decision.
According to reporting from The Wall Street Journal, some “observers have said that the decision by the U.S. and its allies to freeze many of Russia’s foreign currency reserves could cause other countries to become more hesitant to keep their reserves in dollars and erode the supremacy of the dollar in global trade and finance.”
This hesitation is good news for Elvira Nabiullana (58), Chairwoman of the Central Bank of the Russian Federation since 2013 and the 140 million citizens of the Russian Federation residing across its eleven time zones.
European Union (EU) members including Sweden and Slovenia support a reimbursement mechanism to obtain funds for reparations including the imposition of a tax upon exports of oil and gas from the Russian Federation.
According to Secretary of the Treasury Janet Yellen, “The rebuilding costs, ultimately, in Ukraine are going to be enormous. And certainly looking to Russia- one way or another -to help provide some of what’s necessary for Ukraine to build is something we ought to be pursuing.” Emphasis added.
If the State of Israel had been attacked by the Islamic Republic of Iran, would Secretary Yellen’s baseline statement about the Russian Federation have been true for any responsibilities for Iran? That the government in Tehran would need to “help provide some of what’s necessary…” Likely, her reaction would be to the government in Tehran- you destroyed it, you rebuild it.
As of 11 April 2022, the Kyiv, Ukraine-based Kyiv School of Economics estimated at US$80 billion the value of damage inflicted in Ukraine since 24 February 2022 by the armed forces of the Russian Federation. As of 21 April 2022, David Malpass, President of the Washington DC-based World Bank Group (World Bank), estimated the infrastructure damage value at US$60 billion.
The government of Ukraine estimates total economic losses since 24 February 2024 to range from US$564 billion to US$600 billion to US$1 trillion. Mr. Malpass reported that “priority should be to fill Ukraine’s current financing needs in a way that minimizes its future debt burden, so grant contributions will be very important.”
Volodymyr Zelensky, President of Ukraine, believes that Russian Federation assets “have to be used to rebuild Ukraine after the war as well as to pay for the losses caused to other nations” and the Russian Federation “feel punishment for this war.” He supports a “a special tax on war” with the proceeds from the liquidation of sanctioned (frozen) property and reserves of the Central Bank of the Russian Federation used to compensate Ukraine. The idea is for the 190 members of the Washington DC-based International Monetary Fund (IMF) to donate 10% of their US$650 billion in reserve assets (special drawing rights) received in 2021 from the IMF.
The IMF has approved US$1.4 billion in emergency financing for Ukraine and cancelled US$2.2 billion from a previous US$5 billion loan. Conditions of the previous loan included reforms and efforts to reduce endemic corruption and lack of transparent oversight in Ukraine.
The IMF expects the economy of Ukraine to contract at least 35% for 2022 as a direct result of the 24 February 2022 invasion by the armed forces of the Russian Federation and IMF leadership supports an emphasis on grants and “highly concessional financing,” asking countries to support providing US$15 billion during the each of the next three months to support Ukraine government-operated programs. The government of Ukraine reports it requires approximately US$5 billion to US$7 billion per month for operating expenses. The United States has provided US$500 million and is providing an additional US$500 million to Ukraine for use to make payments for salaries, pensions, and other government-operated programs.
The government of Ukraine is hoping for a fast-track membership process for it to become the twenty-eighth member of the EU. Membership would include revenue sharing and access to EU-sourced financing, loans, payment terms, and military protection. Unlikely, however, that the EU membership process for Ukraine would be moved ahead of Candidate Countries (Albania, Republic of North Macedonia, Montenegro, Serbia, and Turkey), but may be moved ahead of Potential Candidates (Bosnia and Herzegovina and Kosovo). There is a logic in the EU accepting Ukraine and all of the other candidates as one group, even though each country has particular commercial, economic, and political deficiencies which would require multi-year subsidies and multi-year tolerance from other members of the EU.
Some in the EU, and joined by Mr. Rinat Akhmetov, a Ukrainian national who is founder and president of Donetsk, Ukraine-based System Capital Management (SCM), the largest diversified financial and industrial group in Ukraine (with a reported 200,000 employees among 500 companies operating in 30 countries), has a net worth of approximately US$4 billion, support a 21st Century version of the Marshall Plan and Lend-Lease Policy.
According to Mr. Akhmetov, there must be an “unprecedented international reconstruction program, a Marshall Plan for Ukraine,” referring to the United States-financed assistance program focused upon rebuilding Western Europe from 1948 to 1952- the US$13.2 billion appropriated then would be today equivalent to approximately US$135 billion. The “Lend-Lease” Policy (officially Act to Promote the Defense of the United States) enacted in 1941 and ended in 1945 was valued at US$50.1 billion, today equivalent to approximately US$500 billion. The then-U.S.S.R. was an early recipient of funds.
Bloomberg News (19 April 2022): The European Union is planning to establish a solidarity trust fund to finance the reconstruction of war-shattered Ukraine as member states were told they should expect to pay the bulk of the costs. The European Commission told diplomats it’s working on an EU instrument focusing on the long-term needs of the country instead of a multilateral tool since the bloc will foot much of the bill, according to people familiar with the discussion. Modeled on the post-Covid-19 recovery fund for member states, it would finance investments and reforms in agreement with Ukraine’s government, but it’s not clear how much would be provided through grants or loans, the people said. Since the war is still ongoing, the EU executive’s arm isn’t willing to put a price tag on the task, but told EU ambassadors that the figure would reach hundreds of billions of euros over decades. The topics of post-war reconstruction and possible war reparations are expected to garner attention over the next weeks as senior officials in Brussels and Washington plan to discuss ways to support Kyiv financially and to ensure that the enormous amount of money isn’t misused, EU officials said. It’s hard for countries to move too far on any plan with Russian forces still attacking Ukrainian cities, but even if the war ends, there will be significant obstacles. Ukraine’s endemic corruption -- and the lack of robust oversight mechanisms -- are two of the biggest. The Netherlands has suggested that any new reconstruction tool could be used to help implement governing structures in the country that would bring it closer to the EU and smoothen its eventual accession path, the people said. As a first step, the commission would conduct a thorough assessment of the financial needs together with the World Bank.
LINKS To Related Articles
https://www.ft.com/content/50aae1a2-088a-47f9-b936-30fa02cf03de
https://slate.com/news-and-politics/2022/04/seized-russian-assets-yachts-ukraine-reparations.html