After months of debate, Congress will hand President Joe Biden the legal authority to seize billions of dollars worth of Russian state assets to help Ukraine. The Senate voted overwhelmingly Tuesday night to pass the measure — known as the REPO Act — as part of a foreign aid package that included assistance for Ukraine, Israel and Taiwan. The White House supports the idea of tapping Russian assets to strengthen Ukraine as the country seeks to defend itself against Russia’s invasion and looks toward reconstruction. But getting the legal authority from Congress might have been the easy part. The tougher challenge will be the diplomatic work of convincing reluctant allies in Europe, where most Russian state assets are held, to join the effort. A big question is how the Biden administration can leverage the new law in its negotiations with G7 countries and the European Union, where officials have expressed concern about the legality and geopolitical wisdom of pressing ahead with taking Russia’s sovereign assets. Clay Lowery, executive vice president at the Institute of International Finance, said passage of the REPO Act would be an “accelerant” on negotiations between the U.S. and European allies to move forward. “It is unprecedented. It is difficult. That doesn’t mean it’s impossible,” said Lowery, a former top Treasury Department official, “We're definitely past midfield, but we're not necessarily in the red zone yet either, because the Europeans aren't there yet. And that's a big deal because they are just a much bigger player on this.” One immediate consequence of the legislation will be new transparency into where about $5-8 billion of Russian state assets are held in the U.S. The law requires the administration within 90 days to begin determining the location of the assets and report to Congress within 180 days. The vast majority of the assets, roughly $200 billion, are held in Europe. There’s little expectation that the U.S. will act unilaterally even though the new law gives that power to the president. The Biden administration has signaled its desire to take joint action with allies in the coming months. Treasury Secretary Janet Yellen tried to rally support among fellow finance ministers on the sidelines of the IMF-World Bank meetings last week. And administration officials have been working through various options before the G7 leaders meeting in Italy in June where the issue is expected to come up. "Congress took an important step in that effort with the passage of the REPO Act, and I will continue intensive discussions with our G7 partners in the weeks ahead on a collective path forward," Yellen said in a statement Tuesday night, adding that it was "urgent" for the U.S. and allies to act. Daleep Singh, deputy national security adviser for international economics, said in a speech in Kyiv earlier this month that tapping the value of frozen Russian assets was a “first step” toward helping rebuild Ukraine. “International law is clear on this point,” Singh said. “Russia must pay for the damage it has caused in Ukraine. And it is not for Russia to decide if or when that happens.” In the U.S., the REPO Act passed with bipartisan support. But it had some prominent critics, including Sen. J.D. Vance (R-Ohio) and the conservative Heritage Foundation, which argued that seizing assets was too legally and financially risky. Across the Atlantic, European leaders have also expressed concern about the legality of taking the assets as well as fears of Russian retaliation. European Central Bank President Christine Lagarde warned last week that confiscating Russian assets would “start breaking the international legal order that you want to protect.” Sen. Sheldon Whitehouse (D-R.I.), one of the cosponsors of the legislation, says he expects the Biden administration will use the new powers in cooperation with allies. “There'll be conversations, probably through the G7, about how best to do it,” he said. “And then we'll be able to bring massive international economic pressure to bear on Russia to stop its murderous bullying of Ukrainians." Rep. French Hill, a senior member of the House Financial Services Committee and architect of the law, says the Biden administration should work with G7 countries and the EU on crafting a “mirror” process to go after Russian sovereign assets there. But Hill (R-Ark.) wants Biden to flex the power of the new law right away. The administration should “proceed with taking those Russian Federation sovereign assets in the United States and using them to be the first contribution into this trust on behalf of Ukraine,” Hill told Zach Warmbrodt in an interview. “In my view, using the trust is the best way to have the most flexibility in aiding Ukraine with Russian sovereign assets,” Hill said. “Once in the trust, they could be used as collateral for a sovereign loan to Ukraine or a Euro bond issue on behalf of Ukrainian reconstruction or general operations.” Another “more legally defensible” option, he said, would be to “use the income of that trust to benefit the Ukraine budget gap or economic reconstruction. IT’S WEDNESDAY — Be sure to send any tips to MM host Zach Warmbrodt at zwarmbrodt@politico.com.
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