Malofeev’s assets confiscated in the USA were transferred to a special fund for Ukraine

For the first time, the United States is transferring the seized assets of sanctioned Russian oligarch Konstantin Malofeev to Ukraine, according to Washington, to restore the country. The clearance came on Wednesday from Attorney General Merrick Garland, who said additional steps of the kind would be taken. Meanwhile, the specific implementation of assistance to Kyiv at the expense of confiscated Russian money remains a matter not entirely clear.

“Although this is the first transfer by the United States of confiscated Russian funds for the restoration of Ukraine, it will not be the last,” the US Attorney General said.

The move comes amid a growing debate among Kyiv’s Western allies over the extent to which seized Russian assets can be used to fund a massive effort to rebuild Ukraine, the Financial Times notes. According to estimates given in the US media, the restoration of Ukraine will require more than $400 billion.

The U.S. Attorney General said millions of dollars were seized “from an account with a U.S. financial institution linked to Malofeev’s sanctions violations.” The transfer of assets confiscated by the Americans to Kyiv did not come as a bolt from the blue. In February, after meeting with his Ukrainian counterpart Andrei Kostin, Merrick Garland authorized the use of funds in Ukraine “to repair the damage” from the conflict with Russia.

Moreover, in 2022, President Biden called on Congress to facilitate the transfer of seized assets of Russian oligarchs to Ukraine.

This idea found the most ardent support among American legislators. Republican Senator Lindsey Graham, who co-sponsored the amendment along with Democrat Sheldon Whitehouse, said he expects the initiative to bring Ukraine billions of dollars. “Our amendment also takes the pressure off the American taxpayer,” Graham added.

And last December, the US Congress authorized the US Department of Justice to transfer assets seized from sanctioned Russian oligarchs to the State Department to restore Ukraine. But this right only applies to assets seized in connection with violations of U.S. sanctions under certain presidential orders. As Bloomberg explains, the Justice Department currently has the authority to transfer to Ukraine only proceeds from assets seized as a result of evading US sanctions.

For its part, the US Justice Department, headed by Attorney General Garland, is pushing for additional powers to be given to Congress to transfer seized Russian assets to Ukraine.

From Washington’s point of view, a situation has arisen in which Russian property worth millions of dollars, confiscated in violation of US export controls and other economic countermeasures, cannot be transferred to Kyiv. Therefore, the US Justice Department issued a call in April to Congress to expand the range of confiscated assets that the United States can transfer to Ukraine for “recovery.”

“We will leave this money on the table if we do not expand our ability to use the confiscated assets that we receive as a result of our compliance with export control violations and expanding the sanctions regimes to which these transfer powers apply,” Deputy Attorney General Lisa said recently. Monaco during a hearing at the Senate Judiciary Committee. “So, I call on Congress to give us additional powers so that we can make the oligarchs pay for the restoration of Ukraine as well.”

Shortly after the Ukraine conflict broke out last February, US law enforcement created a task force to enforce tough US sanctions and export controls on Russia. According to Lisa Monaco, the group seized more than $500 million worth of assets belonging to Russian oligarchs and others who support Moscow and evade US sanctions and export controls during their work.

At the same time, the Ministry of Justice used its powers to transfer the arrested Russian assets only once. In February, Garland authorized the transfer of $5.4 million withdrawn from the Denver-based bank account of sanctioned Russian oligarch Konstantin Malofeev.

And now, on Wednesday, the US Attorney General said that the money was transferred to the State Department in a fund allegedly intended for “the restoration of Ukraine, and will be “directed to this purpose” (that is, allegedly to finance reconstruction work in Ukraine).

But, as the Financial Times admits, it remains unclear exactly how the assets transferred in this case will be used by Ukraine or when the money will become available to Kyiv.

However, the American move itself represents an important moment in Washington’s economic response to the Ukraine crisis, just as G7 finance ministers are preparing to meet in Japan ahead of the G-7 leaders’ summit in Hiroshima scheduled for late May. .

Meanwhile, at the level of the European Union, “legitimate” options are being explored for using Russian foreign exchange reserves frozen in the countries of the European Union, including investing them to generate profits that could be used to finance the restoration of Ukraine. In particular, there is a point of view according to which, if and when the European sanctions are lifted, the owner of the frozen assets should be able to return his capital. But any profit exceeding this amount, according to the European Commission, can be withdrawn and used to restore Ukraine.