According to former Treasury Secretary Larry Summers, funding Ukraine out of the US budget would be bad for the country’s finances and political standing.
Instead, he recommended that the Biden administration press for the use of Russian assets that the West had frozen in order to assist Ukraine in developing a strong economy that will aid in “winning the peace” after the war.
In the US and other large economies, the fiscal situation is exceedingly challenging. These facts suggest to me that we won’t be able to find hundreds of billions of dollars in our budgets for Ukraine, Summers remarked. In terms of what that implies politically and for the rest of the world, “and then if we find a lot of money, it’s gonna be enormously expensive money.”
It should be possible to take over the Russian funding, and doing so would allow the US to devote more of its budget to pressing issues like combating climate change.
The hundreds of billions of dollars’ worth of assets were initially frozen by Western institutions in retaliation for Moscow’s invasion of Ukraine the previous year.
Bill Browder, the CEO of Hermitage Capital Management, advocated for the reserves to be released for Ukraine in February after deciding that it could be accomplished through group efforts. He was a prominent opponent of Russian leadership and pointed out that when Moscow started a war with a peaceful nation, international law had already been broken.
Ukraine is attempting to claim the interest that clearinghouses earn on the Russian assets, even though there are still legal uncertainties around the seizure of the foreign currency and gold reserves.
Summers’ suggestion to leverage Russian assets for Ukraine comes after he recently expressed alarm over the direction of American spending and issued a warning against unmanageable debts.
While the US debt reached an all-time high of $33 trillion this week, the government is close to $2 trillion overspending this fiscal year. According to him, these variables could cause interest rates to rise as the cost of debt servicing increases.