“I believe it’s very natural that given the big destruction in Ukraine and big rebuilding costs that they’ll face, that we are going to look to Russia to assist pay not less than a portion of the worth that can be involved,” she said. “It’s not something that’s legally permissible in the USA.”
But throughout the Biden administration, one official said, there was reluctance “to have any daylight between us and the Europeans on sanctions.” So the USA is looking for to seek out some sort of common ground while analyzing whether a seizure of central bank funds might, for instance, encourage other countries to place their central bank reserves in other currencies and keep it out of American hands.
Along with the legal obstacles, Ms. Yellen and others have argued that it could make nations reluctant to maintain their reserves in dollars, for fear that in future conflicts the USA and its allies would confiscate the funds. Some national security officials within the Biden administration say they’re concerned that if negotiations between Ukraine and Russia begin, there could be no option to offer significant sanctions relief to Moscow once the reserves have been drained from its overseas accounts.
Treasury officials suggested before Ms. Yellen’s comments that the USA had not settled on a firm position in regards to the fate of the assets. Several senior officials, speaking on the condition of anonymity to debate internal debates within the Biden administration, suggested that no final decision had been made. One official said that while seizing the funds to pay for reconstruction could be satisfying and warranted, the precedent it could set — and its potential effect on the USA’ status because the world’s safest place to depart assets — was a deep concern.
In explaining Ms. Yellen’s comments, a Treasury spokeswoman pointed to the International Emergency Economic Powers Act of 1977, which says that the USA can confiscate foreign property if the president determines that the country is under attack or “engaged in armed hostilities.”
Legal scholars have expressed differing views about that reading of the law.
Laurence H. Tribe, an emeritus law professor at Harvard University, identified that an amendment to International Emergency Economic Powers Act that passed after the Sept. 11, 2001, terrorist attacks gives the president broader discretion to find out if a foreign threat warrants confiscation of assets. President Biden could cite Russian cyberattacks against the USA to justify liquidating the central bank reserves, Mr. Tribe said, adding that the Treasury Department was misreading the law.