REPO Now, say Lawmakers

A bipartisan group of lawmakers are urging President Biden to act on a new law allowing him to seize frozen Russian assets and give them to Ukraine for reconstruction ahead of the G7 finance ministers’ meeting.

The law, the Rebuilding Economic Prosperity and Opportunity for Ukrainians (REPO),  effective April 24, also directs the President to engage with US allies to establish an international compensation mechanism.

The European Union, United Kingdom and numerous other countries have adopted similarly broad sanctions, centered on crediting the earnings on Russian assets to a Marshall Plan like entity to fund reconstruction.

The G7 meeting would be the perfect opportunity to begin those discussion, Sens. Jim Risch (R-Idaho) and Sheldon Whitehouse (D-RI), along with Reps. Michael McCaul (R-Texas) and Marcy Kaptur (D-Ohio) said in a letter to President Biden.

“To show Russia we are serious, it is critical we are seen to be taking steps toward implementing the REPO Act in support of Ukraine,” the lawmakers wrote. “As you well know, Russia shows no signs of relenting on its illegal military campaign or engaging in multilateral talks, so the time to act is now. As such, we urge you to take swift action to implement the REPO Act and brief us accordingly.”

The lawmakers asked for a briefing by June 1 on the progress of talks being led by the National Security Council to encourage G7 and European Union partners to find creative mechanisms for using Russian sovereign funds frozen in their respective jurisdictions.

“We all agree that acting together with our G7 and European allies is critical to the success of this effort given the vast majority of frozen Russian sovereign assets lie in G7 and EU jurisdictions,” the members wrote.

Finance Ministers are discussing the concept as the meet in Stresa, Italy this week.

“The details of the proposal have not been decided,” Treasury Secretary Janet Yellen said during a news conference Thursday. “We are looking for general agreement on the concept and if we’re able to obtain broad agreement on the concept, we’ll spend the next several weeks” finalizing details, she said.

The Wall Street Journal reports that Ms. Yellen said on Thursday that even if the West eventually loses control of the Russian assets and their proceeds, Moscow would still likely be forced to pay for the Ukraine aid.

Less than $5B of the $280B assets are in the US, with the bulk in European banks, so ultimately the call us our European allies, specifically Belgium's Euroclear, which holds $205B of the assets.

REPO Background

Until the executive branch exercises the powers given it under the law, the assets remain frozen.  Further, as a Skadden client note points out,  court challenges have not been completely precluded by the legislation.

Retaliation has already begun, and Russia could conceivably target industries previously left alone (e.g. pharmaceuticals).  In addition, prior large arbitration awards against Russia may have senior claims.