A recent Opinion article in The New York Times (“$100 Billion. Russia’s Treasure in the U.S. Should be Turned Against Putin,” April 15, 2022) suggested the Biden Administration “liquidate” the billions of dollars of Russian central bank assets frozen by the United States under the International Emergency Economic Powers Act (IEEPA) in order to assist Ukraine in its war effort. Similar proposals have been made before. The authors of the most recent opinion piece take the position that such action would have precedent in prior U.S. government distributions of other countries’ frozen funds. The desire to help the Ukrainian people as swiftly and effectively as possible is admirable, but it is doubtful that the particular course of action proposed is available under IEEPA. Indeed, if it were, the U.S. government would have likely availed itself of such powers in the past.

While IEEPA’s powers are certainly broad, in most instances the statute does not permit the U.S. government to take ownership over—or “vest” in itself—the assets frozen under its authority. When it was enacted in 1977, IEEPA’s lack of a vesting power was one of the few distinctions between that statute, which is used for sanctions in peacetime, and the Trading With the Enemy Act (TWEA), which is used for sanctions during wartime. In the early 1980s the U.S. Supreme Court had occasion to recognize the lack of a vesting power in IEEPA, including in Dames and Moore v. Regan and in Regan v. Wald. The DOJ’s Office of Legal Counsel also acknowledged that IEEPA as originally enacted did not permit vesting.

However, Congress added a limited vesting power to IEEPA through a 2001 amendment. As part of the USA PATRIOT Act, Congress created what is now 50 U.S.C. 1702(c). This section of IEEPA permits the President “when the United States is engaged in armed hostilities or has been attacked by a foreign country or foreign nationals” to “confiscate any property, subject to the jurisdiction of the United States, of any foreign person, foreign organization, or foreign country that he determines has planned, authorized, aided, or engaged in such hostilities or attacks against the United States; and all right, title, and interest in any property so confiscated shall vest.”  That property can then be “held, used, administered, liquidated, sold, or otherwise dealt with in the interest of and for the benefit of the United States, and such designated agency or person may perform any and all acts incident to the accomplishment or furtherance of these purposes.” At present, this exception would not be applicable to the Russian central bank assets as the United States is not engaged in armed hostilities with Russia, nor has it “been attacked” by Russia or groups aided by Russia. (This presumes that recent cyber-attacks do not count for this purpose.)

Without the ability to vest the assets, it is difficult to see how they could be liquidated. The article identifies four previous governmental actions in service of the view that liquidating the Russian central bank assets would not be unprecedented. They, however, do not withstand scrutiny as precedents for the proposed action. The article states:

In 2003, President George W. Bush seized approximately $1.7 billion in Iraqi funds sitting in American banks, allocating the proceeds to aid the Iraqi people and to compensate victims of terrorism. In 2012, Congress made frozen Iranian central bank assets available to settle lawsuits with the families of those who had died in Iranian terror attacks. In 2019, the Trump administration made some frozen Venezuelan central bank assets available to the exiled opposition leader Juan Guaidó.

And just this February, the Biden administration began the process of liquidating around $7 billion in assets of the defunct Afghan central bank rather than hand them over to the Taliban, reserving half for Afghan humanitarian efforts and half to satisfy court judgments in suits filed by the relatives of those killed or wounded in the Sept. 11 attacks.

Assessing these examples reveals that there are some key distinctions between them and the proposed liquidation of the Russian central bank assets. As regards the Iraqi funds, the Bush administration vested them in the United States under the 50 U.S.C. 1702(c) provision noted above, which was permissible in that instance because the U.S. was “engaged in armed hostilities” with Iraq.

Regarding the Iranian central bank assets, as the article notes these were able to be attached to compensate victims of terrorism not pursuant to IEEPA, but because of a separate statute that Congress passed enabling access to the blocked funds.

As regards the Venezuelan central bank assets, the U.S. government was not liquidating those assets, but was instead recognizing Juan Guaidó as the lawful representative of the Venezuelan government (under Section 25B of the Federal Reserve Act), and giving him access to the funds pursuant to that recognition. Similarly, as regards the Afghanistan central bank assets, the Biden Administration’s proposal is that an as-yet-unnamed individual(s) be recognized (again under section 25B) as the lawful representative of the Afghanistan government and therefore be given access to a portion of the frozen assets. Pertaining to the Russian assets, however, the question of who represents the Russian government is not contested.

Even if these examples may not be on all fours with the circumstances presented by the Russian assets, the article also points to the 1981 U.S. Supreme Court case of Dames and Moore v. Regan, stating:

As the Supreme Court affirmed in a landmark case about the Iran hostage crisis, the act gives the president “broad authority” to act in times of national emergency and the power to “nullify, void, prevent or prohibit” any foreign country from “holding” or “exercising any right, power, or privilege” over property in which it has “any interest.” It also authorizes the president to “direct and compel” the “transfer, withdrawal” or “exportation” of such property.

It is certainly true that Dames spoke in broad terms regarding IEEPA’s powers. Indeed, in responding to an argument by petitioner the Court noted that “[a]lthough it is true the IEEPA does not give the President the power to ‘vest’ or to take title to the assets, it does not follow that the President is not authorized under both the IEEPA and the TWEA to otherwise permanently dispose of the assets in the manner done here.”

However, there is reason to be cautious in relying too heavily on Dames to support liquidation or transfer of the Russian bank assets such that there is a change in title. First, the transfer contemplated in Dames was being done with the agreement of the owner of the funds—the Iranian government. (The Algiers Accords reached in early 1981 between the Iranian and American governments had led to the release of the hostages, and set parameters for unfreezing of Iranian assets, as well as established a mechanism for legal claims, the Iran-United States Claims Tribunal.) Dames held that it was permissible for the government to nullify third party attachments to the frozen funds and transfer them in fulfillment of the Algiers Accords.

Second, the Court in Dames cautioned against extending its holding beyond the circumstances of that particular case. As the Court noted, it issued the decision on a rushed basis (the case was argued June 24, 1981, and the Opinion issued just over a week later on July 2), after granting certiorari before judgment, because the Reagan administration claimed that if the legal issues involved were not resolved by July 19, 1981, the U.S. could be considered in default on the Algiers Accords. The Court therefore cautioned: “We attempt to lay down no general ‘guidelines’ covering other situations not involved here, and attempt to confine the opinion only to the very questions necessary to decision of the case.”

In sum, liquidating Russia’s frozen central bank assets at present would likely require new legislation. Should Congress consider such action, it would need to weigh a raft of policy concerns including a thicket of international legal issues and implications for the U.S. role in the world economy. Fortunately, the United States is not dependent on gaining swift access to these particular funds in order to provide necessary aid to the Ukrainian people.

Image: Russian currency (Photo via Getty Images).