Congress is gearing up to give President Joe Biden a powerful new financial tool to strengthen Ukraine, in a move that could redefine modern economic diplomacy. At issue is bipartisan legislation approved by House and Senate committees that would let the administration confiscate around $5-8 billion in Russian sovereign assets under U.S. jurisdiction and use the money to help finance Ukraine’s recovery. Discussions on the plans are expected to ramp up in the coming weeks as Congress hashes out a new Ukraine aid bill. The next move by lawmakers is poised to set a new precedent for how the U.S. navigates future geopolitical conflicts. “When you look at global power rivals, you have to recognize you have a military, diplomatic and economic diplomacy that must be coordinated and must be effective,” Rep. French Hill, one of the drivers of the effort, said in an interview. “To me, this is a significant part of economic diplomacy that goes way beyond adding more names to a sanctions list that aren't going to ever be sanctioned.” While the policy has been taking shape for several months, a series of tense issues and key details still need to be resolved. A big underlying concern among some lawmakers looking to help Ukraine is that it could be seen as a substitute for enacting more aid, which leaders on the legislation say it’s not. On the global stage, the general idea has also run into some resistance in Europe, where most of the frozen assets at issue — around $200 billion — are held. EU leaders are moving ahead in a more narrow fashion by clawing back profits from Russian assets immobilized there, rather than seizing them outright. Part of the thinking behind the U.S. legislation is that it would help make the EU more comfortable with the more legally, politically and economically fraught step of confiscation. Amid European unease, the question of whether the U.S. should have to get G7 buy-in to seize the smaller pool of Russian assets under its jurisdiction has also been one of the points of debate on Capitol Hill. “It would substantially strengthen the ability of the U.S. if it chose to seize the reserves,” said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at Brookings (which has its own explainer here). “That’s important because even though there are not a lot of reserves in the U.S. — they’re mostly in Europe — it would give the U.S. more backbone to push the Europeans to do more.” Hill, an Arkansas Republican, has been heavily involved in the legislation as a member of House Foreign Affairs, which approved it, and House Financial Services, which has separate jurisdiction over economic sanctions. Hill is a former banker, Treasury Department official and Senate aide. While he’s been supportive of the main House bill, known as the REPO for Ukrainians Act, Hill is also pushing to expand the umbrella of potential funds that could be seized and how they could be used. For example, he wants the legislation to go beyond Russian sovereign assets and also cover state-owned enterprises. He’s tried to help rally Europe behind the confiscation plan, including via a joint Wall Street Journal op-ed with Albanian lawmaker Lulzim Basha. He wrote in a separate piece with former Speaker Newt Gingrich last month that the U.S. “cannot wait for G7 approval to lead or act.” “You had a sovereign country invade another sovereign country using the most brutal warfare possible,” Hill told MM. “It's not a civil war. It's an invasion by a P5 member of the United Nations violating every international law that we know. And therefore, when there is a peace settlement, Russia owes to that sovereign neighbor some form of reparation. This is an excellent way to establish a fund for reconstruction of Ukraine following peace.” The Biden administration has also warmed up to the idea. A spokesperson for the White House National Security Council said the administration supports the goals of the “robust bipartisan REPO for Ukrainians Act introduced in the Senate." The administration is also in active conversations with allies and partners including the G7 “to ensure we are all coordinated in making Russia pay.” Staff for House Foreign Affairs Republicans told MM that the differences between the House and Senate approaches are bridgeable and that the real-world impacts of the two plans would be close, if not identical. Sen. Rand Paul (R-Ky.) was the lone vote against the Senate version in committee. But the REPO bills aren’t the only game in town. Some House Democrats are also pushing for the chamber to take up a separate bipartisan bill by Rep. Lloyd Doggett (D-Texas) that would impose a 100 percent tax on the income from Russian assets, echoing the approach taking shape in Europe. One House Democratic aide said it could “garner broad international support, and this would continue to pay over time.” “These bills can move together as they did when approved by the House Foreign Affairs Committee,” Doggett told MM in a statement. “I am a cosponsor of Chair [Michael] McCaul’s REPO legislation, and he is supportive of my bill. We both seek every reasonable way to hold [Vladimir] Putin accountable and offer at least modest restitution to a long-suffering Ukraine.” What would happen if Congress enacted REPO? Peterson Institute senior fellow Nicolas Véron said he’s “very skeptical” the U.S. would act on the assets before Europe. European leaders face a host of fears that may hold them back, including concerns about the future of the euro as a reserve currency and Russian retaliation. Unlike the paralyzed U.S. Congress, Europe has also pledged €50 billion in Ukraine aid, in addition to tapping earnings from Russian assets. “I find it unlikely the U.S. would confiscate without doing it jointly with Europeans,” said Véron, who's also a senior fellow at the Brussels think tank Bruegel. “It would create perceptions that it’s more risky to hold reserves in dollars than in euros, and I’m not sure the U.S. government wants to do that.” It’s Monday — Send tips to zwarmbrodt@politico.com.
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