The Biden administration is making a new push this week to rally reluctant allies behind the idea that billions in immobilized Russian assets should be tapped to support Ukraine. Treasury Secretary Janet Yellen will spend the coming days laying the groundwork as fellow finance ministers gather in Washington for the IMF-World Bank spring meetings. It's expected to be an agenda item at this afternoon's meeting of G7 finance leaders and in other discussions on the sidelines. Officials are considering a menu of options. They include seizing Russia’s sovereign assets outright as well as structuring a loan backed by windfall profits from the assets. The goal is to advance discussions so top G7 leaders can make a decision when they gather in June. U.K. Chancellor Jeremy Hunt told MM Tuesday that the loan idea is “intriguing” and that he wants to talk with Yellen more about it. “We’re very supportive of ways to make Russia pay the price for the appalling crimes that they’ve committed in Ukraine,” he said. “Our starting point is to look at these proposals, particularly the recent proposal from Secretary Yellen, and say, what would it take to make it work?” The Biden administration faces domestic and international political challenges on this front. At home, Speaker Mike Johnson has signaled that the House may act in the coming days on legislation that would give President Joe Biden explicit authority to seize the assets. It comes as Johnson’s job is potentially on the line, with far-right members opposing a related plan to send aid to Ukraine. The proposal to grant seizure authority for Russian assets is bipartisan — and not envisioned as a substitute for more direct financial assistance for Ukraine — but it’s also facing some resistance from the right. As MM scooped Tuesday, Sen. J.D. Vance of Ohio, a Republican close to former President Donald Trump, is rallying opposition. He said in a memo to GOP lawmakers that it poses “potentially dire consequences for the Western financial system and could hinder a future President’s ability to negotiate an end to the Russia-Ukraine conflict." House Foreign Affairs Chair Michael McCaul, whose committee approved the “REPO Act” legislation at issue, responded in a statement to MM that said “Senator Vance’s memo repeats many of the same arguments that I’ve heard previously from the Biden Administration as reasons to not enact this policy.” He said “financial markets understand that this is not a signal that the United States will begin to seize assets from other countries at will.” (Vance says McCaul is “explicitly pushing a priority of the Biden administration and I’m opposing it.”) Rep. French Hill of Arkansas, one of the Republicans who has been most actively involved in driving the REPO Act, is trying to shore up support. In a letter to fellow lawmakers on Friday, he said the plan would not negatively impact the dollar or violate the U.S. Constitution, and he made the case that it’s consistent with international law. “The speaker is supportive of including the REPO Act in his legislative proposal,” Hill told reporters Tuesday. “I think it strengthens the bill. I think it would encourage more Republican yes votes, because of the opportunity to use Russian sovereign assets as collateral as a source of earnings or directly to benefit Ukraine and have less reliance today or in the future on American or French or German taxpayers.” What may be a bigger problem is international buy-in. Europe is home to the bulk of the assets — around $200 billion, compared to the $5-8 billion in the U.S. — and it’s also where there is deep concern about the legal ramifications, economic fallout and potential Russian retaliation that could arise from tapping the money. European leaders have instead opted to claw back profits from the Russian assets. “There is a high degree of unity amongst G7 countries that we need to do everything possible within international law,” Hunt said. “We are also conscious of the fact that the reason that we are so concerned about what Russia did in Ukraine was because it broke international law, and we are trying to uphold the international system. So when it comes to financial sanctions, we want to make sure that we stay on the right side of the line. But we also want to do everything we can to make sure that Russia picks up the tab for the terrible damage that they’ve caused.” Yellen acknowledged the concerns in a press conference Tuesday. “Of course there could be retaliation, and we are looking at the risks that are associated with using these assets and evaluating different strategies that we might present to the G7 leaders,” she said. “Evaluating the risks is part of that. But overall I believe there are ways of managing the risks, particularly if the G7 acts together in unison, and that it’s important for us to do so.” In a related MM scoop, Bank of America and USAID are set to announce today that the lender will assign a senior capital markets executive to advise Ukraine’s government on how to finance the country’s rebuilding effort, according to sources briefed on the plan. BofA CEO Brian Moynihan, who spoke with MM in January about the bank’s efforts in Ukraine, first floated the idea with U.S. officials last year. The move is expected to be discussed at a Ukraine House event in Washington today that will feature U.S. and Ukrainian government officials as well as private sector leaders. The gathering will also highlight Nasdaq’s recent announcement that it will waive listing fees for Ukrainian companies, another initiative that was rolled out with USAID. Happy Wednesday — Send tips to zwarmbrodt@politico.com.
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