US encounters European skepticism in last-ditch push to seize $300B in Russian assets for Ukraine leverage

By Kayla Tausche, Alex Marquardt, Jennifer Hansler and Oren Liebermann, CNN

(CNN) — With just days left before handing over the keys to the US government, the Biden administration is making a last-ditch effort to seize hundreds of billions of dollars in Russian assets as future negotiating leverage for Ukraine, according to two senior administration officials.

Top Biden aides have been working to convince European partners to support moving some $300 billion of Russian money into a new escrow account that would be released only as part of a peace deal. The money belongs to the Russian Central Bank and was initially frozen three years ago after Russia invaded Ukraine.

Most of that money is still being held in European banks, though a fraction remains in banks based in the US.

Seizing the assets would be meant to send a simple message to Moscow, one senior administration official told CNN: “If you want your money back, you’re going to have to come talk.”

Senior Biden officials have consulted closely on the idea with President-elect Donald Trump’s national security team, including Sen. Marco Rubio, his secretary of state designee, and Rep. Mike Waltz, tapped for national security adviser.

The Trump camp, according to people familiar with the matter, is generally supportive of the strategy, believing that the seized money could give Russia fresh incentive to come to the negotiating table, with Trump wanting to see a swift end to a war he believes has already gone on too long.

The Europeans, however, are not as keen on the idea and have raised concerns about violating international law if banks confiscate Russia’s money outright.

For more than a year, US officials have worked to ease those concerns and find a way to use the frozen Russian money in a way that could benefit Ukraine. In a deal that was seen as a compromise, G-7 countries agreed last year to use interest that had accrued from the frozen investments, which generate a return each year of about $5 billion, as a loan to Ukraine.

The resulting $50 billion loan would be paid back by the investments’ profit over a decade.

With just days to go before a transition of power in Washington, Europeans remain skeptical about confiscating the principle of the frozen Russian cash, sources told CNN, making it highly unlikely that any deal gets done before Trump assumes office.

Senior US officials suggested that Friedrich Merz, the leader of Germany’s Christian Democratic Union party who is poised to become chancellor, is open to the idea of pursuing the strategy – but he hasn’t taken office.

President Joe Biden had expected to discuss the issue with Italian leaders and Ukrainian President Volodymyr Zelensky during a meeting in Rome this week, which the US cancelled as the most destructive fire in Los Angeles’ history raged across the city. Biden spoke by phone with Zelensky last Friday. It’s unclear if the topic of the Russian money came up.

The White House has long been supportive of using the $300 billion in frozen Russian money to fund Ukraine’s reconstruction and increase Ukraine’s leverage. In recent meetings, Biden has personally broached the topic with G-7 leaders, a White House official said.

In its final weeks, the Biden team has looked for other ways to bolster Ukraine’s position on the battlefield and its balance sheet ahead of Trump’s inauguration. The US last week announced new sanctions on secretive ships transporting Russian energy. That came a day after the White House said it would send a final tranche of $500 million worth of weapons, bringing the total amount of security aid for Ukraine to more than $65 billion.

Biden officials have stressed that they want to leave the Trump administration with the strongest hand possible on Ukraine.

Speaking at a press conference in Paris last week, Secretary of State Antony Blinken again stressed that the outgoing administration wants to make sure that, if the Trump administration chooses to negotiate, that it would do so from a “position of strength and that President Trump could get the strongest possible deal.”

Trump has repeatedly voiced his desire to quickly bring the war to a close. Blinken acknowledged that “we’re at a point in the coming year where it may be that the parties will choose to negotiate.”

While the Biden administration has rushed to use as much of the money authorized by Congress to send to Ukraine, it will not have been able to disburse all of it before its term expires next week. There will be “just under $4 billion” in funding from the Presidential Drawdown Authority that will roll over from the outgoing Biden administration to the incoming Trump administration for funding aid to Ukraine, according to a Defense Department spokesperson.

As for the G-7 loan program, the US committed $20 billion toward it and delivered its portion to the World Bank in December. But only $1 billion has been disbursed, with the rest to come on a World Bank schedule, according Ukrainian officials. To what extent the Trump administration could try to claw back the remainder if it hasn’t been delivered is a cause for concern among Ukrainian officials.

The Kremlin called the $1 billion transfer theft and has repeatedly blasted the freezing of its assets.

“This money was stolen from us, and the blocking of our assets is absolutely illegal, violating all norms and rules,” Putin spokesman Dmitry Peskov told reporters last month.

In a recent interview, Zelensky said he told Trump to instead give the $300 billion in frozen Russian assets to them to cement the strength of the Ukrainian military as a kind of security guarantee that Ukraine would want for agreeing to end the war.

“Take money, what we need for our interior production, and we will buy all the weapons from the United States,” Zelensky said. “We don’t need gifts from the United States. It will be very good for your industry, for the United States. We will put money there. Russian money, not Ukrainian, not European.”

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