Putin Proposes $1 Billion from Frozen US Assets for Gaza and Ukraine

Overview of Russia's Frozen Assets

MOSCOW, Jan 22 (Reuters) - President Vladimir Putin has said that Russia is ready to donate $1 billion in U.S. dollars from its sovereign assets frozen in the United States to President Donald Trump's Board of Peace and commit an unspecified amount for the restoration of Ukraine.

Putin has said he is studying Trump's invitation to join his Board of Peace, which has been sent to dozens of world leaders, including Ukraine's President Volodymyr Zelenskiy. Trump launched the initiative with some leaders on Thursday and said others would join later.

Trump first proposed the initiative in September when he announced his plan to end the Gaza war. He later made clear the board's mandate would be expanded to tackle other conflicts worldwide. The charter says that permanent members must help fund the board with a payment of $1 billion each.

Putin offered to use $1 billion from its frozen assets in talks with Palestinian leader Mahmoud Abbas on Thursday.

WHAT DID PUTIN SAY?

Putin said that Russia could donate the money to the initiative due to Russia's "special relationship with the people of Palestine", according to comments reported by the Kremlin from the Security Council meeting on Wednesday.

Putin is due to meet U.S. envoys Steve Witkoff and Jared Kushner later on Thursday, with the Kremlin emphasizing the importance of bilateral economic relations and trade in the ongoing talks.

Amount of Frozen Assets

HOW MUCH RUSSIAN MONEY IS FROZEN IN THE US?

The central bank said in its last comprehensive report on its holdings from the start of 2022 that about 11% of its $613 billion gold and forex reserves, or about $67 billion, were held in dollar-denominated assets.

Dollar-denominated assets can only be held at U.S.-based depositaries.

The central bank estimates that about $300 billion of Russia's sovereign funds are frozen by Western countries. Most of these assets are frozen in Europe and are held at Belgian depositary Euroclear.

The Russian Elites, Proxies, and Oligarchs (REPO) Task Force, created by the Group of Seven, European Union, and Australia, in 2023, estimated frozen Russian sovereign assets at $280 billion.

Axios reported in September 2023 that the task force had identified only $5 billion in Russia's sovereign assets frozen in the U.S. The Central Bank's head, Elvira Nabiullina, declined to comment on the geographical distribution of the frozen assets.

Legal Implications of Asset Release

HOW WOULD IT WORK?

The Kremlin's spokesman, Dmitry Peskov, said on Thursday that the move will require an unblocking of the assets by the U.S. authorities and that Russia still considers the freeze as illegal.

"It's still unclear how it will be legally structured. All of this needs to be discussed," Peskov said.

Russia's central bank filed a lawsuit in Moscow last December seeking $230 billion in damages from Euroclear in response to the EU's move to make the freeze indefinite and proposals to confiscate the assets to fund Ukraine.

Potential Uses of the Funds

Reuters sources said last year that Russia is open to the idea of using its frozen sovereign assets for the reconstruction of Ukraine as part of the peace deal but will insist that part of the money is spent on the territories it controls.

Some proposals from leaked drafts of a peace plan included an idea to use one-third of Russia's total frozen assets to fund U.S.-led efforts to rebuild and invest in Ukraine, while the rest would go to a U.S.-Russia investment fund.

(Reporting by Elena Fabrichnaya and Gleb Bryanski; editing by Guy Faulconbridge and Philippa Fletcher)