Gillian Tett

Welcome to Open to Debate. I am your guest moderator, Gillian Tett, standing in for John Donovan, and I’m absolutely delighted to be here today. I was recently in Kiev, where there is heated debate right now over not just how to win the war, although that’s very important, but also how to win the peace. And central to that is a question of money. Where are the resources going to come from to rebuild Ukraine in the future? And that cuts to the key issues we’re going to be discussing today, which is should Ukraine get Russia’s frozen assets? There’s a lot of money there. And, there are very divergent views on this. So, let’s get in and hear about our debaters today. On the yes side of the question, should Ukraine get Russia’s frozen assets, we have Former Treasury Secretary Larry Summers. Welcome back to Open to Debate, Larry.

Lawrence Summers

Good to be with you.

Gillian Tett

And arguing no to the question of should Ukraine get Russia’s frozen assets, we have the senior fellow and director of international economics at the Council on Foreign Relations, Benn Steil. Benn, great to have you here.

Benn Steil

Thanks for having me, Gillian.

Gillian Tett

Now, before we start, I want to get a sense of why you are here today. What motivates you to make this argument? Larry, what is driving your passion on this issue?

Lawrence Summers

I think the case is compelling on moral grounds, compelling on economic grounds, compelling on political, uh, grounds, and compelling on effectiveness grounds. Reality is that you can debate the precise amount of damage that Ukraine has suffered. You can debate the best ways to deploy funds, what the right role of the private sector is, and so forth. But the conclusion is, I think, inescapable, that Russia has aggressed against Ukraine, that the cost of that aggression is immense, that the global stake in Ukraine’s resisting that aggression and renewing a strong state is immense. These are resources that are available, and this will send a strong signal of the inappropriateness of aggression of the kind Russia has engaged in.

Gillian Tett

Right, and I’m going to stop you there, Larry, because we’re going to hear your argument very clearly in a few moments. I just wanted to know what’s driving your own personal passion here. Benn, can you tell me quickly, what is the reason why you decided to join today?

Benn Steil

Well, there’s no difference between Larry and me about the ethics of seizing Russian reserve assets. I mean, uh, Russia is clearly the aggressor in this conflict, uh, and they should be made responsible for repairing the, the enormous damage to the Ukraine. The debate between me and Larry is going to be about the effectiveness of a strategy of seizing Russian reserve assets. Given wider US and Western priorities, I think it would be, from an effectiveness standpoint, a very bad decision indeed.

Gillian Tett

Okay, so you both agree that you care deeply about the future of Ukraine, that you want to help, but you have different perspectives on exactly how to do that in relation to the assets. You’re each going to now have four minutes to state your case and make your opening pitches. So, Larry, you’re up first. You answer yes to the question, should Ukraine get Russia’s frozen assets? Tell us why.

Lawrence Summers

We’ve already discussed that Ukraine needs those… needs substantial resources to reconstruct its economy. We’ve already discussed that Russia is the clear aggressor here, and has forfeit moral right to those assets, because it’s obliged morally to compensate Ukraine. International law provides clearly for the principle of compensation, and this is a case where compensation is clearly necessary, clearly appropriate, and where the need for that compensation has been recognized very broadly internationally.

Russia has felt free to seize assets of Western companies. There are many precedents, during and after wars, when the assets of aggressing states have been put to use to resist and to compensate the victims of their aggression. Put frankly, there is no other viable way. The needs are measured well above $100 billion. Even if that money could be found for Ukraine in other ways, it would surely come at the expense of other foreign assistance efforts at a time when those efforts as well need to be substantially augmented for the benefit of, uh, Africa, for the benefit of climate change, for the benefit of protecting against pandemics.

So this is right for taxpayers, this is right for the world as a whole, and I think it’s right to send a signal about the consequences for aggressing states, in terms of assets that they have deployed. Some worry that this will somehow set an unfortunate financial precedent. First of all, we’ve already crossed that Rubicon. These assets have been frozen. No one believes that they are actually going to be back for, uh, Putin’s use, and we have seen no appreciable consequences in, uh, global foreign exchange markets. Second of all, the actions here are really quite extreme and extraordinary, not of a kind that take place on any kind of regular, uh, basis. And last, uh, this is something that is clearly justified by, uh, international law, and so I believe that it is very important that, at a critical time when people are looking for global action, the international community move forward.

Gillian Tett

Well, thank you very much indeed, Larry, for that very forceful argument. Um, so now, let’s hear from Benn. Benn, you obviously care deeply about the fate of Ukraine, but you argue no to the question, should Ukraine get Russia’s frozen assets? Tell us why.

Benn Steil

From an effectiveness standpoint, there are three reasons why I would oppose outright seizure of, uh, Russian reserve assets. The first, uh, reason would be, uh, legal. I disagree with Larry on the, uh, legal basis for seizing the assets. The second would be geostrategic, that I think the United States, and indeed the, the West as a whole, have geostrategic aims that would be undermined by an outright seizure, and the third is, um, uh, history. Uh, as Mark Twain said, “History may not repeat itself, but it does rhyme,” and I do think there are things that we can learn from the past with regard to the present conflict in Ukraine.

First from a legal perspective. In terms of international law, outright seizure of Russian reserve assets would be illegal under the Doctrine of Sovereign Immunity. There are exceptions there. The main one is for what’s called countermeasures. States are entitled to take countermeasures in order to bring an aggressor back into compliance with international law. But the important caveat there is that the any countermeasures that are taken need to be reversible. And in the case of outright seizure of Russian reserves, giving them to Ukraine, it would not be reversible. In terms of domestic US law, there are complicated issues there, and I’ve got very little time, so I’m just going to quote Janet Yellen on this, and I think she has the final word, quite frankly. Quote, “It would not be legal in the United States for the government to seize these assets,” unquote.

Uh, from a practical perspective, we have to acknowledge that, uh, other major states around the world think that the s-, uh, seizure would be illegal, China, India, Brazil. 87 countries abstained or voted against a UN resolution in November of 2022, which was going to set the grounds for Russian reparations. The consequences of outright seizure, I think would be extremely severe. Other states might seize US assets in the f- in the, uh, future, on the grounds that, on the pretext that the US had made such, uh, unilateral determinations in the past.

We could see the movement of, uh, foreign reserve as- assets out of the US dollar and out of US jurisdiction. Um, we could see dedollarization of trade. Now, Larry and I agree that there’s no, uh, imminent replacement currency for the US dollar, but you could see the world trading system basically devolve into a form of barter in which states try to maintain bilateral balances, uh, between them, which would really underline the multilateral s- trading system.

In terms of larger geostrategy, we’re not going to end this conflict with Russia simply surrendering and pulling its troops out. At best, we’re going to have an armistice. There needs to be some measure of Russian tacit cooperation in order to reconstruct Ukraine. To get that, we’re going to need regime change in, uh, Moscow, and in order to promote regime change, we need to offer the Russians some prospect of unfreezing the assets in the future, um, with a peace deal in, um, in which Russia would be, uh, obligated to pay some form of reparations.

In terms of history, many have referred to the Marshall Plan as a model for reconstructing Ukraine. Uh, three years before the Marshall Plan in 1947, we had the Morgenthau Plan in 1944, which was very punitive, which would have dismembered Germany, deindustrialized it. Um, and this very punitive strategy, which also involved massive reparations, uh, actually prolonged the war. It gave Hitler propaganda to keep the troops, um, fighting, and made it more difficult for the United States to promote positive regime change in, uh, Germany, and therefore was abandoned.

There’s also the case of Czechoslovakia, which bordered the S- Soviet Union. They were invited to participate in the Marshall Plan, um, and they wanted to participate in the Marshall Plan, but Stalin, in order to prevent it, precipitated a Communist coups in Czechoslovakia in February of 1948 to keep them out. The Ukraine suffers from the same geographic problems that Czechoslovakia does. The Ukraine and Russia share 1,400 miles of border, so any sort of Marshall Plan in Ukraine will be impossible without that tacit cooperation from Russia that I mentioned, and we need to maintain the reserves as a bargaining chip.

Gillian Tett

Right, thank you. We both know where you stand, so in the next segment, we will dive into our discussion on our key question, should Ukraine get Russia’s frozen assets? We’ll be right back with Open to Debate. Hi, and welcome back to Open to Debate. I’m Gillian Tett, your guest moderator for our debate on the question, should Ukraine get Russia’s frozen assets? And I’m here with Larry Summers and Benn Steil, who both just gave their opening statements. Larry says yes, Benn says no.

Larry says yes because essentially there is a moral, economic, and political grounds in doing that, he says. He points out that in the past, there are plenty of historical precedents. He also argues that at a time when taxpayers in the West don’t have a lot of spare money to give Ukraine, and the re- g- reconstruction needs are going to be absolutely enormous, we can argue about how many hundred and billions, or even trillions it might be, but they’re certainly going to be enormous. He argues that there’s no other way to fund those reconstruction needs than to start by looking wherever you can for help, and that includes using those Russian assets that have been frozen.

Benn Steil argues, in contrast, that we need to keep those assets as a bargaining chip. He also argues that in fact, historically, there haven’t been many positive cases where countries have actually seized assets. On the contrary, doing that has often harmed countries to such a point that you store up more problems for the future than you actually solve. And he also points out that it may simply be illegal, and of course, many other countries around the world appear to be strongly opposed to this.

So, two very different perspectives. Perhaps I can start with you, Larry, and say what do you say to Benn’s argument that actually, leaving the assets frozen as they currently are could be a very useful bargaining chip for the future when dealing with Russia, that the West simply does not want to throw away right now?

Lawrence Summers

Deploying the assets to address the needs of Ukraine, no one would contemplate that all of the assets would be spent this year, or next year, or the year after that. So substantial assets would remain to work through any hypothetical scenario in which there was regime change in, uh, Russia, and it was appropriate that there be, uh, support. To compare what I am suggesting with the Morgenthau Plan, which involved the execution of hundreds of thousands of Germans, the occupation of German territory, and the razing and destruction of German capacity, to compare that with taking assets that have already been frozen, and are not currently available for any Russian use, is, I think, a very, very different thing.

I’m an economist, Benn. I will leave the geopolitics of armistices to others, but it defies belief that after what has happened, using Russia’s assets, which Russia has not been able to use for some substantial period of time, is the equivalent of the Morgenthau Plan, or that that is the equivalent of the Versailles Treaty’s infliction on, uh, Germany, I find, uh, highly implausible. And in the event that it were to happen, there is nothing to stop the, um, allies at such a moment from providing whatever types of assistance were considered to be important to a nascent, uh, Russian state, and if they were provided in that way, there would be the prospects of the kind of substantial conditionality and basing that support on their continuing, uh, maintenance of their commitments. That’s something very different than simply allowing the assets to go back automatically, to Putin if he does sign an armistice.

Gillian Tett

Benn, you are a historian. I don’t think anyone’s going to out-history you on these details, but what I’d like to know is… You know, Larry says basically it’s ridiculous to make that comparison, because, um, what happened after World War II was of an order of magnitude bigger. Would you agree? And can you remind us just how big the frozen assets are, um, at the moment? I mean, what kind of numbers are we talking about? And really, does it shrivel in comparison to World War II or not?

Benn Steil

There are elements of, uh, the reparations regime after World War II that we can compare to what we’re talking about now. Um, the Russians, for example, after World War II were demanding 10 billion in reparations, which in current dollars would be 1/3 of the size of the Russian, uh, Central Bank reserves that we’re talking about seizing now. So this is, this is very substantial money, over 300 billion US dollars, so e- extremely succe- substantial. Also quite difficult to seize legally. What th- thi- this has spread among, uh, many jurisdictions, is going to require an unprecedented level of cooperation, so there, there aren’t, uh, any good historical examples of a, a seizure o- on this scale.

But more importantly, let’s just assume, uh, for the sake of argument that when the, the s- the fighting pauses, uh, Putin is still in power. It is a physical impossibility to start a major reconstruction, uh, effort, again, without some form of tacit cooperation from Russia. I’m not talking about a peace treaty, just a willingness to let it go forward. They can immediately destroy any infrastructure that we start to build. They can undermine the Ukrainian state through cyber attacks. Of course, the seizure of, uh, assets of, of any state that will participate, so to even talk about the possibility of a massive reconstruction effort without at least Russia agreeing to sit on the sidelines and not interfere, strikes me as being wholly unrealistic.

We need to have those reserves in order to prepare for the day when there’s a new Russian regime that will be willing to come to the table and talk about a comprehensive settlement, not just with the Ukraine, but with the West. We need that not just for peace and security in Ukraine, but for Eastern Europe more widely.

Gillian Tett

But what about the other assets that have also been seized from Russian oligarchs, Benn?

Benn Steil

Yeah.

Gillian Tett

Would you treat those differently? Because they’re not as big as the Central Bank assets, but they’re still pretty sizable.

Benn Steil

We’re talking about tens of billions there. Um, in, in that regard, there are significant legal issues as well, not just in the United States and in Europe, uh, relating to the necessity of associating the activities of these oligarchs with the activities of the Russian state and Ukraine. Um, so, uh, clearly, the ethical case is, is there, but the legal case is, uh, difficult to make.

Gillian Tett

Larry, what do you say about the point about the illegality of it? Because you know, when I was in Kiev recently, and it’s impossible to go to Ukraine without feeling this overwhelming sense of the need to help somehow. So, my question to you, though, is this. What people in Ukraine pointed out is that it’s not really just an American decision. If there was going to be the assets being seized, it would affect European law as well. We’ve heard Janet Yellen saying that she doesn’t think it’s legal under Eur- under US law. How can you possibly have this go through, um, when it seems to be so unclear under European law?

Lawrence Summers

I’m not a lawyer. I don’t think Benn’s a lawyer. I don’t think you’re a lawyer. I don’t think Janet Yellen is a lawyer. Larry Tribe is perhaps the leading constitutional lawyer in the United States, and he has just come out with 150-page brief explaining in detail why this is legal under IEEPA in, uh, the United States, under the principle of compensation that Benn referred to under international law. The government of Canada has concluded that this is legal under international law. Look, we all are citizens of the world. These matters are not clearcut. Successful leaders of countries look to their lawyers to provide legal authority for things that are imperative to do, and I can assure you that the legal case here is far stronger than the legal case in any number of actions in the student loan sphere, in the immigration sphere, in the environmental sphere, that governments of both parties, in, uh, the United States have undertaken. It’s just wrong to say that there’s a sovereign immunity issue, uh, here. Sovereign immunity refers to judicial actions taken in one country’s courts with respect to another country. This is not an action being taken in any court. This is an action being taken by executive authorities, according to the compensation principle.

Gillian Tett

Right. Well, reading between the lines, what you appear to be saying, unusually tactfully, is you think that Janet Yellen is wrong, um, or not yet completely appraised of all the arguments as of yet. Since we are, none of us, lawyers, maybe we should in fact turn to a more practical economic issue, which is that Benn has pointed out that if the assets were frozen, other countries might well lose faith in the US dollar system going forward.

Benn Steil

Seized, I think you mean, seized.

Gillian Tett

Seized.

Benn Steil

Yeah. Yeah.

Gillian Tett

Sorry, se- not frozen, seized. Thank you. Benn, how serious is the threat of a run away from the dollar as a result of the seizure of these assets?

Benn Steil

We’ve already seen many countries raise concerns about what they call weaponization of the US dollar. I would stress that Larry and I agree that there is no, um, immediate successor, uh, in, w- waiting in the wings to the US dollar to play the dollar’s role. Having said that, that does not mean that you could not still see a dedollarization of the, um, uh, global trading system. What you’re already in effect seeing, um, is countries engaging in forms of barter trades, swapping commodities for commodities. Uh, Iran and Iraq, for example, oil for, uh, gas.

Um, you’re seeing limited use of other national currencies in international trade, but not in the same way as the US dollar is used, um, where exporters are happy to, um, uh, maintain excess dollars as a store of value, but what they’re actually seeing to do, um, uh, is to balance their trade bilaterally with each of their national trading partners. And if the whole world were to move materially in that direction, you would have a fundamental destruction of the multilateral trading system that we’ve come to depend on over the past several decades. That would mean a much less efficient, uh, global, uh, economy.

Lawrence Summers

First of all, I think the distinction between freezing for an indefinite horizon and seizing is a very small one, and so whatever risks there are in this, we have already crossed that Rubicon. Second, this is something that’s very different than most of the issues where people talk about weaponization of the dollar, because this is the simultaneous weaponization, if you want to see it that way, of the euro, the Canadian dollar, the British pound, and, uh, the Japanese, uh, yen. So, I’m not sure where, uh, somebody else is, uh, going, uh, to go to, uh, deploy their assets. Third, if Iran and Iraq, if Iran is forced into a certain measure of more barter trade with Iraq, I for one think that’s probably a good thing rather than a bad thing, uh, starting from, uh, where we are, uh, now. And I find the idea that this is going to cause the generalized breakdown of the world trading system, uh, to be, respectfully Benn, something that’s quite hyperbolic.

The fundamental question is, are we going to give the aggressor, Putin, veto power over the establishment of subsequent, uh, arrangements, and take the position that we somehow have to bribe him to stop his wanton aggression? And that is not a position that I think most, uh, in the West, uh, want to take after what has happened. And it’s a position that is inconsistent with other things. The G7 collectively declared that Putin was a war criminal. Once we are at a place where we have collectively declared that Putin is a war criminal, I don’t understand the, uh, position, uh, being taken here, that we can’t be in a position of using Russia’s resources to compensate for the damage that has been done.

So I’m astonished by Benn’s idea that until we have gotten Putin to acquiesce, we can’t be in a position, prudently, of beginning a process of reconstructing Ukraine, so as to enable it to, uh, maintain its strength.

Gillian Tett

I’d just like to quickly float to both of you a question which I heard voiced in Kiev, which was even if you don’t directly seize the assets, could you securitize them or use part of them to essentially provide the underpinning of an insurance program to tempt Western companies to go into Ukraine and be compensated out of that pot if something went wrong? Is there ways to use clever financial engineering to make the whole process a bit more palatable or a bit more, um, harder to understand for the wider geopolitical community? Benn?

Benn Steil

Yeah. Um, there are. Um, it’s already being discussed in Europe, um, as an alternative to outright seizure of the, um, reserve assets, merely seizing the income of those, um, uh, assets, at, um, Euroclear and, and, um, uh, Belgium. That strikes me as trying to maintain a position of being sort of half-pregnant. Um, but, uh, to, to answer Larry directly, of course Putin has a veto here. We made a concession to reality after World War II, uh, that certain countries, um, were going to be in the Soviet sphere because we were not willing to go to, um, uh, nuclear war against the Soviets to bring those states into the, the Western fold. Uh, likewise, we’re not going to do that in Ukraine. So this is not about getting Putin to acquiesce.

Again, this is about getting some form of t- what I would emphasize would be tacit cooperation, um, from, um, the Russians. And I don’t believe we’re going to get that without, uh, a new regime, um, uh, i- in Russia, and so there has to be, at the end of the day, to s- even begin a massive reconstruction, um, uh, an ag- an agreement, um, with Russia, exa- a- as to exactly the contours of their financial responsibility here. And there would be extreme consequences to Russia, financially, for not coming to, um, uh, to a final deal. The sanctions would stay in place. Um, the asset freeze, um, uh, will re- remain in place. This will, in my view, put enormous political pressure on the Putin regime over time, and hopefully will eventually undermine it.

Gillian Tett

Right. Well, I can see from Larry’s face he strongly disagrees.

Lawrence Summers

My friend Benn has a very different concept of this war than I think the G7 does. The G7 is not fighting this war so that Ukraine can have the status of a nation on the wrong side of the Iron Curtain when it ends, so I find it absurd the suggestion, I assume that at some point U- uh Ukraine is going to join the European Union, in a way that would not have been possible for the enslaved states after the end of the Second World War. So, the idea that this whole line of argument is premised on a view that Ukraine is analogous to post-World War II Czechoslovakia seems to me to be misunderstand the posture that President Biden and every other major European leader has taken throughout.

Gillian Tett

Right. Well, I can see from both of your body languages that this is getting heated. So, it’s a great moment to take a break. We’ll be right back with Open to Debate. Hi, and welcome back to Open to Debate. I’m Gillian Tett, your guest moderator, here with Larry Summers and Benn Steil, discussing the question, should Ukraine get Russia’s frozen assets? Now, we’ve had a very lively debate already, but one of the first people we have who wants to ask a question is Kate Marino, a business editor with Axios. Kate, welcome there. What is your question?

Kate Marino

Hi, yes. Thanks, Gillian, and thanks, Larry and Benn. My question is actually for you, Benn. You mentioned that as part of a peace plan in which the frozen assets would potentially be returned to Russia, um, that in that scenario, Russia would be asked to pay reparations. Um, and so my question is, if Russia doesn’t agree to pay reparations at that point in the future, um, and considering that reparations for damages from wrongful acts are a globally recognized principle, would you at that point advocate for deploying the frozen funds for the benefit of Ukraine’s recovery, meaning kind of as a stand-in for reparations that Russia refuses to pay? Um, and maybe through a process of an international claims commission or, you know, something like that, but in general, what, wh- what would you be thinking then?

Benn Steil

Well, we, we could start with the, uh, EU proposal to seize the income, um, from the, uh, Ru- Russian, um, uh, frozen reserves at, um, uh, Euroclear. And, um, that, that would provide Ukraine with approximately $3 billion, uh, uh, a year, on- ongoing, which it could use for reconstruction. But let’s still be clear about this. I have to keep emphasizing it. Russia would af- uh, uh, would have to still agree not to interfere with the reconstruction process in Ukraine, because they could absolutely destroy it very quickly. So th- there is, there is no alternative to h- um having some form of ongoing dialogue with Russia, um, throughout the, um, reconstruction process.

Since money is fungible, at the end of the day, the money that Russia would pay towards reparations does not technically have to come from the reserve pool. It could come from another pool, which would provide us with some degree of, I think, legal cover for what we’re doing, which is im- im- im- important, um, uh, internationally. But I think this is going to be a major diplomatic challenge, um, uh, getting, uh, such an agreement with Russia. I would imagine that to the extent that, uh, we’re ultimately successful in getting, um, significant reparations from Russia inter- in return for a comprehensive peace deal, we would not even be calling it reparations for the purpose of, um, uh, uh, an official document. It will be called something else, that can be sold within R- um, uh Russia as not being, um, uh, punitive.

This is just part of normal international diplomacy, and it’s not a matter of coddling Putin. It’s not a matter of, uh, having to ask Putin for permission. It’s a matter of the realities of geography, which haven’t changed since after World War II. And to go back to, to Larry’s point earlier, in the case of Czechoslovakia and Poland, um, the US and the UK, particularly the U- uh UK were quite adamant that they should be part of the, the W- the Western fold. As you know, Churchill felt particularly strongly about, um, uh, Poland, um, uh, in that regard, but we simply did not have the military resources to do it without escalating the conflict to a, to a level that was considered to be unacceptable at the time.

We’re in the same place right now with the Ukraine with regard to the debate of not whether Ukraine will join the EU, but whether Ukraine will join NATO, and that sort of question, whether we like it or not, is going to get wrapped up into the whole issue of a comprehensive reparations, uh, uh, agreement with Russia.

Gillian Tett

Right, well I can see that Larry has got lots of thoughts swirling around his head, and you’ll have time in a moment, Larry, to come back in, but I want to bring in the next, um, question, which is from Daniel Flatley, who is a national security reporter with Bloomberg’s Business Week. Daniel, the floor is yours.

Daniel Flatley

Uh, good afternoon. Good to be with you. Um, my question is about Congressional action on this issue. So, as I’m sure you’re probably aware, there’s a bill called the Rebuilding Economic Prosperity and Opportunity Act, or REPO Act. So, would that clear up any of the legal questions around the authorization for this action? Would it, because it’s not actually taking the action but authorizing it, send any kind of signal to the Russians, uh, that this is a serious prospect in the West, the seizing of these assets? And the third aspect of this is, as we debate support for the Ukrainian war effort in the US, would this at all help shore up support for those who may have doubts about the US’s continued ability to pay or, uh, willingness to pay?

Gillian Tett

Larry, um, do you want to pick that up at all? I know you’re not trained as a lawyer, but you have been talking a lot to Larry tribe, who is an esteemed lawyer.

Lawrence Summers

I would support the legislation, though I don’t think that the legislation is necessary. Um, I think adequate legal authority exists without the legislation, and I think the questions about the seriousness of US will frankly have less to do with issues that would be cleared up by, uh, legislation than they do by voices in the debate who take the positions that Benn is taking, that, uh, place so much emphasis on the need for Russian, uh, consent and the need, uh, for getting, uh, Russia’s permission before, uh, taking, uh, certain actions. And I think it’s that kind of, uh, concern that is most problematic, in terms of buttressing morale in Ukraine, and I think it’s that kind of concern that is most problematic in terms of our allies in, uh, Europe as well.

Benn Steil

That particular, um, piece of legislation, uh, as was emphasized, would only authorize, uh, the administration to m- move forward, uh, on this front. But I count at least three public statements, very clear public statements, from Treasury Secretary, um, uh, Yellen, that outright seizure of these assets would not be legal. I really don’t understand, from a wholly political perspective, how at this point, we could even proceed on that front, at least without, um, uh, a new Treasury secretary. That seems to me to be politically implausible.

Gillian Tett

Well, as we know, when you have two lawyers, you often have three opinions over time.

Benn Steil

Yeah (laughs).

Gillian Tett

And um, there’s certainly a lot to fight for here. It’s going to be fascinating as a case study for future, um, law students if nothing else. Steve Liesman. Um, I’d like to bring in you. Um, you’re the senior economics reporter at CNBC, um, and you have a question too. What would you like to ask, Steve?

Steve Liesman

I really want to thank you and, uh, Larry and Benn for putting this together. This is terrific. Um, does a simple deal get around some of these things? And simple, I say advisably, in the sense of Russia agreeing to cede these assets, um, in return for access, again, to the, um, uh, dollar funding markets, as well as the energy markets and other, uh, removal of sanctions. The other, uh, question I have is whether or not we ought to be thinking more long term about this, and create some rules of the road. I don’t know if that would strengthen or weaken the dollar as a global currency, to have more explicit rules of what, when you might or might not lose these assets in some form of, uh, sanction process. Thanks.

Gillian Tett

Thanks, Steve. Great questions. Benn, you’ve got a couple minutes to answer that, and then Larry.

Benn Steil

Okay, from a, a, a practical perspective, I just want to emphasize the seriousness about the direction in which we’ve been heading, um, since the conflict, seriousness of these financial issues. I had written a piece in Foreign Affairs back in, um, 2022, um, uh, documenting the many tens of billions of dollars of, um, US securities at Euroclear that was, uh, effectively untraceable to them because they a- appeared to be using Chinese intermediaries. So we already know this sort of way of getting around, uh, seizures works. It would be effectively, uh, untraceable f- from my knowledge, um, legally to Russia, and therefore impossible to, to seize.

If we actually go forward with a, a mass seizure like this, you are really going to see a breakdown of the wh- the whole, uh, legal regime surrounding custodianship of, um, reserve assets, a- around the world. And I think the economic implications, not to mention the political implications, would be e- e- enormous. Um, we’re under-i-mining our future effectiveness in terms of financial statecraft. In other words, we have been able, to date, to impose financial sanctions on, on countries around the world, like Iran and North Korea, because of the dominance of the dollar in financial transactions, and the ability to trace dollar assets to the ultimate owners. I’m very concerned about taking steps that would lead that system to break down entirely.

Gillian Tett

Larry, any comments? This isn’t your final statement. You will get two minutes in a moment to tell us exactly why you think Benn is totally wrong.

Lawrence Summers

(laughs).

Gillian Tett

But in answer to the question of should there be some other way of having a bargain with Russia, giving it access to the dollar system in exchange for maybe handing over the assets, do you see, uh, any other way to have a bargain?

Lawrence Summers

I don’t, I don’t see any great appeal in reducing our sanctions regime and starting to give them access to the dollar window that they don’t have. Benn can’t have it both ways. If it’s possible to hold dollar assets in secret so they won’t be subject to sanctions in the future, then I presume this won’t do any damage to the centrality of the dollar in the system, and will be a one-off, uh, penalty for Putin for having made the mistake of not having used those ways, uh, in, uh, the past. So you can’t have it both ways that it’ll destroy the role of the dollar and, uh, that, uh, people will hide their dollar assets in the future.

Gillian Tett

Well, I can see you’re both looking suitably indignant, and we are now coming up to the crunch point, where you both get a chance to explain in two minutes what your closing arguments are. I am keenly aware that no doubt you’ll both be writing more about this in the coming weeks or months. Benn has already written some fabulous pieces on where the Russian money appears to be going or not going, and I’m sure Larry has plenty more columns in him on this very topic. But right now, I’m going to ask you to each say, in two minutes and just two minutes, what your closing arguments are. I’m going to start with Larry. You’ve got the floor, and you’re going to tell us why you answer yes to the question, should Ukraine get Russian’s, Russia’s frozen assets? And the clock starts now.

Lawrence Summers

We agree that Ukraine is entitled to support. We agree that Russia has done wrong. We agree that it is feasible to make available the assets, uh, to Ukraine. We agree even that it’s fine to make use of the fruits of, uh, the assets. So all we are discussing is whether the fruits can be transferred or whether the assets themselves can be transferred. The enormous benefit, in terms of generating far more for Ukraine than would otherwise be the case, of protecting foreign assistance efforts for poverty, climate, and so forth, and for deterring the kind of stunning wrong that has been done in Russia, by setting this precedent in a clear way, seemed to me to make an overwhelming case. And I would submit that if it was clear that those assets were in play, dwindling, and being redeployed to counter Russia’s aggression, we would have more flexibility, more leverage, in any of the vitally important diplomacy that’s going to be necessary before this conflict ends, which it eventually will.

Gillian Tett

Well, thank you very much indeed. I think that’s the first time in history I’ve managed to keep Professor Summers to less than two minutes, and that was a very punchy set of arguments. Benn, give us your two minutes worth, the clock is restarting now, of why you think it is wrong to seize Russia’s assets.

Benn Steil

So, I have a set of narrow concerns related specifically to the, uh, war in Ukraine, and then I have a set of broad concerns related to the functioning of the, uh, international financial system, and, um, the functioning of US, um, uh, geostrategic influence around the world. With regard to the narrow issue of the war in Ukraine, geography is an immutable fact. It is a reason, um, why is it far more difficult for us to provide security for some countries, uh, in Europe, like Ukraine, rather than others that, um, are, are situated further West. And it explains why the border between NATO and the Warsaw Pact was where it was after World War II, and we can’t change that.

Uh, I continue to maintain that any sort of lasting peace, not just in Ukraine, but in Eastern Europe more widely, will require some measure of tacit cooperation with Russia. In order to get that tacit cooperation, I believe we will need regime change in Russia, and that asset seizure virtually guarantees a continuation of this conflict, not just between Ukraine and Russia, but between Russia and the West, even under new Russian leadership.

With regard to my broad concerns, I would emphasize that governments representing a strong majority of the world’s population disagree strongly with Larry Summers. They believe that seizure would be, uh, illegal, and my view is that if we were to go in that direction, we would undermine the rule of law internationally, we would undermine US influence in the world, we would undermine the status of the dollar, and with that, the continuation of the multilateral trading system we have all come to take for granted in spreading prosperity and reducing poverty around the world in recent decades.

Gillian Tett

Well, thank you very much indeed to both of you. You have both laid out strong arguments explaining why you deeply disagree with each other. I think the one thing we can agree on, though, is a shared sense of horror about what is happening. As I said, I was recently in Kiev, chatting to a friend of mine, Yulia, who comes from Kharkiv, has a young son who’s serving, and out of his tw- group of 12, uh, closest friends, she told me there are only four left alive. That is what is unfolding. That is a horror which we are all agreed in wanting to end. Where we disagree is on the tactics.

So, I’d just like to say a very big thank you to both of you for laying out these incredibly important arguments, that are going to get only more, not less important in the weeks ahead. I’d also like to thank Kate, Daniel, and Steve for your very thoughtful questions. This debate came out of a conversation at a recent meeting of the Aspen Strategy Group. And I’d also like to thank the audience for tuning into this episode of Open to Debate. As a nonprofit, our work to combat extreme polarization that is plaguing so much of the world today through civil and respectful debate is generously funded by listeners just like you, along with the Rosenkranz Foundation and the other supporter of Open to Debate. And it’s also made possible by a generous grant from the Laura and Gary Lauder Venture Philanthropy Fund.

Robert Rosenkranz is our chairman. Clea Conner is CEO. Lia Matthow is our chief content officer. Alexis Pancrazi, Katz Kristen Wooler, and Marlette Sandoval are editorial producers. And Gabriella Mayer is our editorial and research manager. Andrew Lipson is head of production. Max Fulton, Production Coordinator. Damon Whitimore, the engineer, Gabrielle Iannucelli is our social media and digital platforms coordinator, Raven Baker is events and operations manager. Rachel Kemp is chief of staff, and the theme music is by Alex Clement. It takes a village to get this done. And last but not least, I’m your guest moderator, Gillian Tett. Thanks for listening, and see you next time.