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In a Sharp Reversal, Biden Opens a Path for Ukraine to Get Fighter Jets

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The president told allied leaders that he would allow Ukrainian pilots to be trained on American-made F-16s, and is prepared to approve other countries’ transferring the jets to Ukraine.President Biden told U.S. allies on Friday that he would allow Ukrainian pilots to be trained on American-made F-16 fighter jets, several U.S. officials said, adding that the president is prepared to let other countries give F-16s to Ukraine — a major upgrade of the Ukrainian military and a sharp reversal.Since Russia launched its full-scale invasion of Ukraine 15 months ago, officials in Kyiv have pleaded for advanced warplanes to overcome Russian air superiority. But Mr. Biden has resisted, concerned that the jets could be used to hit targets deep inside Russia, and prompt the Kremlin to escalate the conflict. Pentagon officials have said that other weapons, especially air defenses, were needed more urgently, and the high cost of the F-16s could squeeze out other matériel.But several European countries that belong to the NATO alliance and have F-16s in their arsenals have called for an international effort to provide the training and transfer of their jets to Ukraine. Doing so would require American permission, because the weapons were first sold to them by the United States. Though not the most advanced U.S. fighter, the F-16 carries powerful radar that can spot targets from hundreds of miles away and modern missiles and other technology that American officials do not want duplicated or falling into hostile hands.Mr. Biden told other leaders of the Group of 7 nations, the world’s wealthiest democracies, of his decision on pilot training, opening a path to supplying Ukraine with fighter jets, at their summit meeting in Hiroshima, Japan, according to several officials who requested anonymity to speak candidly about sensitive deliberations.They said the United States and its allies would discuss in the coming months how to supply Kyiv with the jets themselves, and one senior administration official said the White House was prepared to approve that step. The United States is not expected, at least under current plans, to send its own F-16s.A group of F-16s flying over Washington, in March. Ukraine has said it needs the jets to compete effectively with Russia’s air force.Andrew Caballero-Reynolds/Agence France-Presse — Getty Images“I welcome the historic decision of the United States and @POTUS to support an international fighter jet coalition. This will greatly enhance our army in the sky,” President Volodymyr Zelensky of Ukraine, who is expected to address the Group of 7 this weekend, wrote on Twitter.In a joint statement, the allied leaders said they were committed “to continuing our security assistance to Ukraine as it defends itself against Russia’s aggression, tailoring our support to Ukraine’s needs.” The group vowed to provide “financial, humanitarian, military and diplomatic support Ukraine requires for as long as it takes.”Earlier on Friday, Mr. Zelensky had addressed an Arab League summit in Jeddah, Saudi Arabia, where he challenged the neutral stance many Arab countries have adopted on the war and implored them to help save Ukrainians “from the cages of Russian prisons.” “Unfortunately there are some in the world, and here among you, who turn a blind eye to those cages and illegal annexations,” he said. “I am here so that everyone can take an honest look, no matter how hard the Russians try to influence.”Western officials said Mr. Zelensky planned to travel to Hiroshima this weekend to attend the summit meeting. Ukrainian officials gave conflicting accounts, however, with some saying he would appear in person and others saying he would speak to the leaders by video link. The vagueness appears to reflect security concerns as Mr. Zelensky moves across the globe seeking aid and arms; he was in several European countries last week, as well as Saudi Arabia on Friday.Ukraine is expected to launch a major counteroffensive soon, hoping to retake more territory seized by Russia in the war’s early days. Any delivery of fighter jets would be months away, too late to affect that plan.The Group of 7 leaders in Hiroshima spent much of the day discussing the coming counteroffensive and its chances of forcing Russia to the negotiating table to discuss some form of an armistice that would stop the fighting, even if it did not resolve the central issues of the war.They are also poised to unveil a slew of new sanctions and export controls to clamp down further on the Kremlin’s ability to fund the war, and to crack down on third-party nations that have been secretly providing Russia with banned technologies that can be used in weapons systems.Earlier on Friday, President Volodymyr Zelensky of Ukraine told a gathering of the Arab League not to “turn a blind eye” to the atrocities committed by the Russian forces.Saudi Press Agency/EPA, via ShutterstockThe allies appear determined to demonstrate unified resolve to support Ukraine at a time when President Vladimir V. Putin of Russia seems to be betting that their interest and commitment will wane.Mr. Biden’s changed stance on F-16s is his latest about-face on allowing Ukraine to field advanced weapons, including HIMARS rocket launchers, Patriot air defense missile systems and Abrams tanks. In each case, the president at first refused, only to change his mind under pressure from European allies.Top Pentagon officials have consistently said that they do not believe Ukraine needs F-16s at this stage of the conflict.Celeste A. Wallander, the assistant secretary of defense for international security affairs, told the House Armed Services Committee last month that advanced Western fighter aircraft ranked only “about eighth” on Ukraine’s priority list. She said officials have focused on resources with the “highest priority capabilities, and that has been air defense, artillery and armor.”But the push for F-16s by Ukraine and its supporters in Congress was reinforced this week when Yahoo News reported that an internal U.S. Air Force assessment concluded it would take only four months to train Ukrainian pilots to operate the fighters, a far shorter time frame than Pentagon officials had cited previously.The document, which a senior Air Force official confirmed and said was shared with several NATO allies who fly F-16s, contained a detailed assessment undertaken in late February and early March at Morris Air National Guard Base in Tucson, Ariz. Two Ukrainian pilots were given “no formal training” on the F-16, according to the assessment, other than a brief familiarization, and then were tested on a flight simulator for several hours.A Ukrainian soldier passes a crater caused by Russian bombardment in the village of Heorhiivka in eastern Ukraine. Kyiv says F-16s would greatly increase their forces’ ability to defend against aerial attacks.Finbarr O’Reilly for The New York TimesAn appearance by Mr. Zelensky at the Group of 7 would be a strong rebuff to Mr. Putin and a reminder of how thoroughly relations with Russia have deteriorated. Thirty years ago, President Clinton met with Boris Yeltsin, then the president of Russia, in Japan to begin to map the integration of a post-Soviet Russia into the world economy, as Mr. Clinton promised to seek the repeal of Cold War sanctions. Five years later, Russia joined what became the Group of 8.Now all that has been reversed. After Russia annexed Crimea in 2014, it was suspended from the group, and left it entirely three years later. Russia’s economy is struggling under sanctions imposed since the invasion last year, particularly the price cap on its oil sales, and more are coming.Britain on Friday said it was implementing a ban on Russian diamonds, copper, aluminum and nickel. Australia also said on Friday it was imposing new financial sanctions targeting 21 entities and three individuals, including Russia’s largest gold company, petroleum and steel companies and defense entities.The United States also rolled out a “substantial package” of restrictions, including cutting off 70 more firms from American exports and adding more than 200 individuals and entities to its sanctions list. The measures are meant to crack down on people or companies that are helping Moscow to evade existing sanctions.The fresh round of penalties “will further tighten the vise on Putin’s ability to wage his barbaric invasion and will advance our global efforts to cut off Russian attempts to evade sanctions,” Treasury Secretary Janet L. Yellen said in a statement on Friday.Until now, the Ukraine war has seemed far away from daily life in Moscow, but Russian leaders are growing increasingly nervous about the repercussions of a promised Ukrainian counteroffensive.Natalia Kolesnikova/Agence France-Presse — Getty ImagesThe United States will broaden sanctions to cover more corners of the Russian economy, striking at its avenues to acquire semiconductors and other high-tech goods from Group of 7 nations, which American officials said Friday are critical to Russia’s ability to build weapons. Antony J. Blinken, the secretary of state, said in a release that the new sanctions would take aim at components Russia needs to build a drone that is currently being deployed in Ukraine.The new penalties also seek to squeeze Russia’s ability to drill for oil and gas, and to crimp venture capitalists and financial services firms that American officials said were aiding sanctioned Russian businesses.Goods that Western businesses are now prohibited from selling to Russian buyers often reach them through middlemen — changing hands, legal jurisdictions and free-trade zones multiple times. The trade is hard to track and harder to enforce, especially for “dual use” goods that have both civilian and military applications.With many of Russia’s other revenue streams squeezed by previous rounds of sanctions, officials have homed in on diamonds as a lucrative trade still providing Moscow with funding for its war. Russia is the world’s largest supplier of small diamonds, exporting more than $4.5 billion in 2021, making the gem its top non-energy export by value. More

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    How the G7 Oil Price Cap Has Helped Choke Revenue to Russia

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    Group of 7 leaders are prepared to celebrate the results of a novel effort to stabilize global oil markets and punish Moscow.In early June, at the behest of the Biden administration, German leaders assembled top economic officials from the Group of 7 nations for a video conference with the goal of striking a major financial blow to Russia.The Americans had been trying, in a series of one-off conversations last year, to sound out their counterparts in Europe, Canada and Japan on an unusual and untested idea. Administration officials wanted to try to cap the price that Moscow could command for every barrel of oil it sold on the world market. Treasury Secretary Janet L. Yellen had floated the plan a few weeks earlier at a meeting of finance ministers in Bonn, Germany.The reception had been mixed, in part because other countries were not sure how serious the administration was about proceeding. But the call in early June left no doubt: American officials said they were committed to the oil price cap idea and urged everyone else to get on board. At the end of the month, the Group of 7 leaders signed on to the concept.As the Group of 7 prepares to meet again in this week in Hiroshima, Japan, official and market data suggest the untried idea has helped achieve its twin initial goals since the price cap took effect in December. The cap appears to be forcing Russia to sell its oil for less than other major producers, when crude prices are down significantly from their levels immediately after Russia’s invasion of Ukraine.Data from Russia and international agencies suggest Moscow’s revenues have dropped, forcing budget choices that administration officials say could be starting to hamper its war effort. Drivers in America and elsewhere are paying far less at the gasoline pump than some analysts feared.Russia’s oil revenues in March were down 43 percent from a year earlier, the International Energy Agency reported last month, even though its total export sales volume had grown. This week, the agency reported that Russian revenues had rebounded slightly but were still down 27 percent from a year ago. The government’s tax receipts from the oil and gas sectors were down by nearly two-thirds from a year ago.Russian officials have been forced to change how they tax oil production in an apparent bid to make up for some of the lost revenues. They also appear to be spending government money to try to start building their own network of ships, insurance companies and other essentials of the oil trade, an effort that European and American officials say is a clear sign of success.“The Russian price cap is working, and working extremely well,” Wally Adeyemo, the deputy Treasury secretary, said in an interview. “The money that they’re spending on building up this ecosystem to support their energy trade is money they can’t spend on building missiles or buying tanks. And what we’re going to continue to do is force Russia to have these types of hard choices.”Some analysts doubt the plan is working nearly as well as administration officials claim, at least when it comes to revenues. They say the most frequently cited data on the prices that Russia receives for its exported oil is unreliable. And they say other data, like customs reports from India, suggests Russian officials may be employing elaborate deception measures to evade the cap and sell crude at prices well above its limit.“I’m concerned the Biden administration’s desperation to claim victory with the price cap is preventing them from actually acknowledging what isn’t working and taking the steps that might actually help them win,” said Steve Cicala, an energy economist at Tufts University who has written about potential evasion under the cap.The price cap was invented as an escape hatch to the financial penalties that the United States, Europe and others announced on Russian oil exports in the immediate aftermath of the invasion. Those penalties included bans preventing wealthy democracies from buying Russian oil on the world market. But early in the war, they essentially backfired. They drove up the cost of all oil globally, regardless of where it was produced. The higher prices delivered record exports revenues to Moscow, while driving American gasoline prices above $5 a gallon and contributing to President Biden’s sagging approval rating.A new round of European sanctions was set to hit Russian oil hard in December. Economists on Wall Street and in the Biden administration warned those penalties could knock oil off the market, sending prices soaring again. So administration officials decided to try to leverage the West’s dominance of the oil shipping trade — including how it is transported and financed — and force a hard bargain on Russia.Oil tankers near the port city of Nakhodka, Russia. Many analysts were concerned that a price cap might prompt Russia to restrict how much oil it pumped and sold. But the country has mostly kept producing at about the same levels it did when the war began.Tatiana Meel/ReutersUnder the plan, Russia could keep selling oil, but if it wanted access to the West’s shipping infrastructure, it had to sell at a sharp discount. In December, European leaders agreed to set the cap at $60 a barrel. They followed with other caps for different types of petroleum products, like diesel.Many analysts were skeptical it could work. A cap that was too punitive had the potential to encourage Russia to severely restrict how much oil it pumps and sells. Such a move could drive crude prices skyward. Alternatively, a cap that was too permissive might have failed to affect Russian oil sales and revenues at all.Neither scenario has happened. Russia announced a modest production cut this spring but has mostly kept producing at about the same levels it did when the war began.Fatih Birol, the executive director of the International Energy Agency, has called the price cap an important “safety valve” and a crucial policy that has forced Russia to sell oil for far less than international benchmark prices. Russian oil now trades for $25 to $35 a barrel less than other oil on the global market, Treasury Department officials estimate.“Russia played the energy card, and it didn’t win,” Mr. Birol wrote in a February report. “Given that energy is the backbone of Russia’s economy, it’s not surprising that its difficulties in this area are leading to wider problems. Its budget deficit is skyrocketing as military spending and subsidies to its population largely exceed its export income.”Biden administration officials say that there is no evidence of widespread evasion by Russia, and that Mr. Cicala’s analysis of Indian customs reports does not account for the rising cost of transporting Russian oil to India, which is embedded in the customs data. A White House official told reporters traveling with Mr. Biden in Hiroshima on Thursday that the Group of 7 leaders would adopt new measures meant to counter price-cap evasion in their meeting this weekend.There is no dispute that the world has avoided what was privately the largest concern for Biden officials last summer: another round of skyrocketing oil prices.American drivers were paying about $3.54 a gallon on average for gasoline on Monday. That was down nearly $1 from a year ago, and it is nowhere near the $7 a gallon some administration officials feared if the cap had failed to prevent a second oil shock from the Russian invasion. Gas prices are a mild source of relief for Mr. Biden as high inflation continues to hamper his approval among voters.After rising sharply in the months surrounding the Russian invasion, global oil prices have fallen back to late-2021 levels. The plunge is partly driven by economic cooling around the world, and it has persisted even as large producers like Saudi Arabia have curtailed production.Falling global prices have contributed to Russia’s falling revenues, but they are not the whole story. Reported sales prices for exported Russian oil, known as Urals, have dropped by twice as much as the global price for Brent crude.The Group of 7 leaders meeting in Japan this week will probably not spend much time on the cap, instead turning to other collective efforts to constrict Russia’s economy and revenues. And the biggest winners from the cap decision will not be at the summit.“The direct beneficiaries are mostly emerging market and lower-income countries that import oil from Russia,” Treasury officials noted in a recent report.The officials were referring to a handful of countries outside the Group of 7 — particularly India and China — that have used the cap as leverage to pay a discount for Russian oil. Neither India nor China joined the formal cap effort, but it is their oil consumers who are seeing the lowest prices from it. More

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    For Biden, Debt Limit Crisis Complicates Trip to Asia

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    Volatility has become the new norm in Washington as the president heads to Japan, where he will reassure world leaders that the debt ceiling showdown will not upend the global economy.President Biden left for Japan on Wednesday for a meeting of the leaders of seven major industrial democracies who get together each year to try to keep the world economy stable.But as it turns out, the major potential threat to global economic stability this year is the United States.When Mr. Biden lands in Hiroshima for the annual Group of 7 summit meeting on Thursday, the United States will be two weeks from a possible default that would jolt not only its own economy but those of the other countries at the table. It will fall to Mr. Biden to reassure his counterparts that he will find a way to avoid that, but they understand it is not solely in his control.The showdown with Republicans over raising the federal debt ceiling has already upended the president’s international diplomacy by forcing a last-minute cancellation of two stops he had planned to make after Japan: Papua New Guinea and Australia. Rather than being the unchallenged commander of the most powerful superpower striding across the world stage, Mr. Biden will be an embattled leader forced to rush home to avert a catastrophe of America’s own making.He was at least bolstered before leaving Washington by signs of progress as both sides emerged from a White House meeting on Tuesday expressing optimism that an agreement was possible. In the preparations leading up to the G7 meeting, officials from the other participating countries have not struck U.S. officials as all that alarmed about the possibility of default, perhaps because they trust Mr. Biden, know that the moment of truth is still a couple weeks away and assume that Washington will get its act together in time.Mr. Biden is set to depart on Wednesday for the G7 meeting in Hiroshima, Japan.How Hwee Young/EPA, via ShutterstockBut that simply underscores how much volatility has become the new norm in Washington. After generations of counting on the United States as the most important stabilizing force in world affairs, allies in recent years have increasingly come to expect a certain level of dysfunction instead. Extended government shutdowns, banking crises, debt ceiling fights and even political violence would once have been unthinkable but have prompted foreign leaders to factor American unpredictability into their calculations.“I think our biggest threat is us,” said Jane Harman, a former Democratic representative from California who later served as the president of the Woodrow Wilson International Center for Scholars. “Our leadership in the world is being eroded by our internal dysfunction. The markets are still betting against our defaulting, and that’s a decent bet. But if we only manage to eke out a short-term extension and the price is onerous budget caps — including on defense — we will be hobbled when Ukraine needs us most and China is building beachheads everywhere.”The White House warned that a default would only embolden America’s adversaries, using the argument against Republicans, whom they blame for playing with fire.“There’s countries like Russia and China that would love nothing more than for us to default so they could point the finger and say, ‘You see, the United States is not a stable, reliable partner,’” said John F. Kirby, a spokesman for the National Security Council.But he sought to play down the effects of the dispute on the G7 meeting, saying that he doubted it would “dominate the discussion” and maintaining that other leaders “don’t need to worry about that part of it.” The president’s counterparts would understand his need to cut short his trip, he said.“They know that our ability to pay our debts is a key part of U.S. credibility and leadership around the world,” Mr. Kirby said. “And so they understand that the president also has to focus on making sure that we don’t default and on having these conversations with congressional leaders.”Even if they understand, though, they see consequences. Mr. Biden’s decision to head home early reinforces questions about American commitment to the Asia-Pacific region and leaves a vacuum that China may exploit, according to analysts. A presidential visit to places like Papua New Guinea, where no U.S. leader has gone before, speaks loudly about diplomatic priorities — as does the failure to follow through.This is not the first time an American president has scrubbed a foreign trip to deal with domestic concerns. President George H.W. Bush canceled a two-week trip to Asia in 1991 to show he was focused on a lagging economy at home, while President Bill Clinton scrapped a trip to Japan during a government shutdown in 1995. President Barack Obama delayed a trip to Indonesia and Australia in 2010 to focus on health care legislation, then skipped an Asia-Pacific summit meeting in 2013 during a government shutdown of his own.The perpetual culture of crisis in Washington, however, has grown only more intense since the arrival of President Donald J. Trump, who threatened to unravel bedrock alliances and embraced longstanding adversaries abroad while disrupting democratic norms and economic conventions at home.Speaker Kevin McCarthy said it was possible that a deal regarding the debt ceiling could materialize in days.Haiyun Jiang/The New York TimesThe debt ceiling showdown between Mr. Biden and Speaker Kevin McCarthy has underscored to the president’s peers that however much he may seek to restore normalcy, U.S. politics has not returned to the steady state of the past — not least because Mr. Trump seeks to reclaim office in next year’s election.World leaders took notice last week during Mr. Trump’s CNN town hall-style interview in which he refused to back Ukraine in its war against Russian invasion and casually endorsed the idea of a default, saying it would not be that damaging and indeed “could be maybe nothing.”That is not how most policymakers and analysts see it.Treasury Secretary Janet L. Yellen said at a meeting of G7 finance ministers and central bankers in Japan last week that a default “would spark a global downturn” and “risk undermining U.S. global economic leadership and raise questions about our ability to defend our national security interests.”Mr. Biden, a veteran of half a century in high office in Washington, has regularly remarked on the uncertainty surrounding America’s place in the world that he discovered when he took office after Mr. Trump’s disruptive four years. “America is back,” he said he would tell foreign counterparts, only to hear, “But for how long?”By contrast to his predecessor, Mr. Biden has conducted a far more conventional foreign policy familiar to world leaders, and foreign officials see him as a more traditional U.S. president. But they also understand that he is presiding over a country whose democracy has been tested and found to be fragile. And they see a fractious politics in Washington that values confrontation over compromise, even at the risk of something that would have once been unimaginable, like a default.“For sure, the U.S. debt ceiling issue will be a topic of conversation and concern at the G7 summit,” Matthew P. Goodman, a senior vice president for economics at the Center for Strategic and International Studies in Washington, said at a briefing about the meeting last week. “I’m sure the other leaders will ask, you know, how serious this risk is. And I assume President Biden will say he’s working on it and doing everything he can to avoid it.”By this point, U.S. partners have become oddly accustomed to the culture that dominates Washington. They have watched the brewing debt ceiling fight with little evident fear.“I don’t think many European governments are very concerned, presumably because these crises come round quite often but never end in disaster,” said Charles Grant, the director of the Centre for European Reform in London. “Cutting short the trip is a bad signal, but there is such good will to Biden in most capitals that they are prepared to cut him some slack.” More

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    Biden Says He Is Confident America Will Not Default on Its Debts

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    Speaking just moments before he left for a diplomatic trip overseas, President Biden said a default would be “catastrophic.”President Biden said a failure by the U.S. to pay its bills would be “catastrophic” for the economy.Tom Brenner for The New York TimesPresident Biden, just moments before he departed on Wednesday for a diplomatic trip to Asia, said he was confident “America will not default” as congressional leaders in both parties offered some signs of optimism about eventually reaching a deal to raise the nation’s borrowing limit.“Every leader in the room understands the consequences if we failed to pay our bills,” Mr. Biden said at the White House on Wednesday before leaving for Hiroshima, Japan, to attend the Group of 7 meeting there. “And it would be catastrophic for the American economy and the American people.”Mr. Biden described his face-to-face meeting with congressional negotiators the day before as productive, “civil and respectful” and said both Democrats and Republicans agreed that the United States cannot default.But his decision to get a final word in on the negotiations signaled that even as he departs for a summit on the global economy, the White House is focused on averting an economic crisis back home.Mr. Biden decided to cut the trip to Asia short to be back for what he called “final negotiations” over the ceiling, the statutory cap on how much the government can borrow to finance its obligations. He is scheduled to return to Washington on Sunday, skipping planned visits to Papua New Guinea and Australia.Mr. Biden echoed the optimism offered by both Democratic and Republican leaders after Tuesday’s meeting.He has designated his senior adviser, Steve Ricchetti, and Shalanda Young, the director of the Office of Management and Budget, to speak to a team of negotiators representing congressional Republicans. Speaker Kevin McCarthy had also commended the move as a sign of progress on Tuesday.“We narrowed the group to meet and hammer out our differences,” Mr. Biden said, adding that the negotiating teams met on Tuesday night and will meet again on Wednesday.Time is running out for the two sides to reach a consensus.The government reached the $31.4 trillion debt limit on Jan. 19, and the Treasury Department has been using a series of accounting maneuvers to keep paying its bills. Treasury Secretary Janet L. Yellen reiterated that the United States could run out of money to pay its bills by June 1 if Congress does not raise or suspend the debt limit, potentially causing a recession or the elimination of jobs.Republicans have said they want to cut federal spending before lifting the ceiling, while Mr. Biden has said negotiating over the cuts must not be a requirement for raising the debt limit. Even so, Democrats have increasingly appeared open to reaching a compromise with Republicans. Both Democratic leaders from New York, Senator Chuck Schumer, the majority leader, and Representative Hakeem Jeffries, the minority leader, told reporters that passing a bipartisan bill in both chambers was the only way forward.Mr. Biden signaled he was open to a potential agreement for tougher work requirements on federal aid programs over the weekend, when he reminded the press that he had voted for such measures — with the exception of Medicaid — as a senator.Asked on Wednesday if he was still considering work requirements, Mr. Biden said it is possible, “but not anything of any consequence.”“I’m not going to accept any work requirements that’s going to have an impact on the medical health needs of people,” Mr. Biden said.Mr. Biden added that he did not believe cutting his overseas trip short would help China gain influence in the region. The administration has sought to bolster partnerships in the region to to counter China’s economic presence. But the ongoing talks forced Mr. Biden to cut stops in Papua New Guinea and Australia.Mr. Biden said he made sure to call Prime Minister Anthony Albanese of Australia on Tuesday to let him know of his decision to cancel part of his trip. While officials in the administration were still deciding whether they would shorten the trip, they also discussed sending a replacement, including Vice President Kamala Harris or Antony J. Blinken, the secretary of state, according to an official familiar with the matter.As of Wednesday morning, there were no such plans to send a substitute. More

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    Russia Sidesteps Western Punishments, With Help From Friends

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    A surge in trade by Russia’s neighbors and allies hints at one reason its economy remains so resilient after sweeping sanctions.WASHINGTON — A strange thing happened with smartphones in Armenia last summer.Shipments from other parts of the world into the tiny former Soviet republic began to balloon to more than 10 times the value of phone imports in previous months. At the same time, Armenia recorded an explosion in its exports of smartphones to a beleaguered ally: Russia.The trend, which was repeated for washing machines, computer chips and other products in a handful of other Asian countries last year, provides evidence of some of the new lifelines that are keeping the Russian economy afloat. Recent data show surges in trade for some of Russia’s neighbors and allies, suggesting that countries like Turkey, China, Belarus, Kazakhstan and Kyrgyzstan are stepping in to provide Russia with many of the products that Western countries have tried to cut off as punishment for Moscow’s invasion of Ukraine.Those sanctions — which include restrictions on Russia’s largest banks along with limits on the sale of technology that its military could use — are blocking access to a variety of products. Reports regularly filter out of Russia about consumers frustrated by high-priced or shoddy goods, ranging from milk and household appliances to computer software and medication, said Maria Snegovaya, a senior fellow for Russia and Eurasia at the Center for Strategic and International Studies, in an event at the think tank this month.Even so, Russian trade appears to have largely bounced back to where it was before the invasion of Ukraine last February. Analysts estimate that Russia’s imports may have already recovered to prewar levels, or will soon do so, depending on their models.In part, that could be because many nations have found Russia hard to quit. Recent research showed that fewer than 9 percent of companies based in the European Union and Group of 7 nations had divested one of their Russian subsidiaries. And maritime tracking firms have seen a surge in activity by shipping fleets that may be helping Russia to export its energy, apparently bypassing Western restrictions on those sales.While Western countries have not banned the shipment of consumer products like cellphones and washing machines to Russia, other sweeping penalties were expected to clamp down on its economy. They include a cap on the price that Russia can charge for its oil as well as restricted access to semiconductors and other critical technology.Companies like H&M halted operations in Russia after the invasion of Ukraine, but the economy has proved resilient.Maxim Shipenkov/EPA, via ShutterstockSome companies, including H&M, IBM, Volkswagen and Maersk, halted operations in Russia after the invasion, citing moral and logistical reasons. But the Russian economy has proved surprisingly resilient, raising questions about the efficacy of the West’s sanctions. Countries have had difficulty reducing their reliance on Russia for energy and other basic commodities, and the Russian central bank has managed to prop up the value of the ruble and keep financial markets stable.On Monday, the International Monetary Fund said it now expected the Russian economy to grow 0.3 percent this year, a sharp improvement from its previous estimate of a 2.3 percent contraction.The I.M.F. also said it expected Russian crude oil export volume to stay relatively strong under the current price cap, and Russian trade to continue being redirected to countries that had not imposed sanctions.Most container ships have stopped ferrying goods like phones, washing machines and car parts into the port of St. Petersburg. Instead, such products are being carried on trucks or trains from Belarus, China and Kazakhstan. Fesco, the Russian transport operator, has added new ships and new ports of call to a route with Turkey that transports Russian industrial goods and foreign appliances and electronics between Novorossiysk and Istanbul.Sergey Aleksashenko, former deputy minister of finance of the Russian Federation, said at an event this month that 2023 would be “a difficult year” for the Russian economy, but that there would be “no catastrophe, no collapse.”Some parts of the Russian economy are struggling, he said, pointing to car factories that shut down after being unable to secure parts from Germany, France, Japan and South Korea. But military expenditures and higher energy prices helped prop it up last year.“We may not say that Russian economy is in tatters, that it is destroyed, that Putin lacks funds to continue his war,” Mr. Aleksashenko said, referring to President Vladimir V. Putin. “No, it’s not true.”Russia stopped publishing trade data after its invasion of Ukraine. But analysts and economists can still draw conclusions about its trade patterns by adding up the commerce that other countries report with Russia.The International Monetary Fund said it expected Russian crude oil exports to stay relatively strong despite a Western price cap. Andrey Rudakov/BloombergMatthew Klein, an economics writer and a co-author of “Trade Wars Are Class Wars,” is one of the people drawing conclusions about this Russia-size hole in the global economy. According to his calculations, the value of global exports to Russia in November was just 15 percent below a monthly preinvasion average.Global exports to Russia most likely fully recovered in December, though many countries have not yet issued their trade data for the month, he said.“Most of that recovery has been driven overall by China and Turkey particularly,” Mr. Klein said.It’s unclear how much of this trade violates sanctions imposed by the United States and Europe, but the patterns are “suspicious,” he said. “It would be consistent with the idea that there are ways of trying to get around some of the sanctions.”Silverado Policy Accelerator, a Washington nonprofit, recently issued a similar analysis, estimating that the value of Russian imports from the rest of the world had exceeded prewar levels by September.One of the case studies in that report was the jump in Armenian smartphone sales. Andrew S. David, the senior director of research and analysis at Silverado, said the trends reflected how supply chains had shifted to continue providing Russia with goods.Samsung and Apple, previously major suppliers of Russian cellphones, pulled out of the Russian market after the invasion. Exports of popular Chinese phone brands, like Xiaomi, Realme and Honor, also initially dipped as companies struggled to understand and cope with new restrictions on sending technology or making international payments to Russia.But after an “adjustment period,” Chinese brands started to take off in Russia, Mr. David said. Overall Chinese exports to Russia reached a record high in December, helping to offset a steep drop in trade with Europe. Apple and Samsung phones also appeared to begin to find their way back to Russia, rerouted through friendly neighboring countries.“Armenia is certainly not the only one,” Mr. David said. “There’s a lot coming through central western Asia, Turkey and the former Soviet republics.”Shipments to Russia of other products, like passenger vehicles, have also rebounded. And China has increased exports of semiconductors to Russia, though Russia’s total chip imports remain below prewar levels.President Vladimir V. Putin at a military training facility in Russia. Military expenditures and higher energy prices helped prop up the Russian economy last year.Pool photo by Mikhail KlimentyevOne major open question is how effectively the Western price cap will hold down Russia’s oil revenue this year.The cap allows Russia to sell its oil globally using Western maritime insurance and financing as long as the price does not exceed $60 per barrel. That limit, which is essentially an exception to Group of 7 sanctions, is designed to keep oil flowing on global markets while limiting the Russian government’s revenue from it.Some analysts have suggested that Russia is finding ways around the effort by using ships that do not rely on Western insurance or financing.Ami Daniel, the chief executive of Windward, a maritime data company, said he had seen hundreds of instances in which people from countries like the United Arab Emirates, India, China, Pakistan, Indonesia and Malaysia bought vessels to try to set up what appeared to be a non-Western trading framework for Russia.“Basically, Russia has been gearing up toward being able to trade outside of the rule of law,” he said.Mr. Daniel said his firm had also seen a sharp uptick in shipping practices that appeared to be Russian efforts to contravene Western sanctions. They include transfers of Russian oil between ships far out at sea, in international waters that are not under the jurisdiction of any country’s navy, and attempts by ships to mask their activities by turning off satellite trackers that log their location or transmitting fake coordinates.Much of this activity had been taking place in the mid-Atlantic Ocean. But after media coverage of suspicious practices in this region, the hub moved south, off the coast of West Africa, Mr. Daniel said.“They’re exploding,” he said of deceptive shipping practices. “It’s happening at an industrial scale.”So far, the oil price cap appears to be accomplishing its goal of reducing the price that Russia can charge while keeping global supplies flowing. But it remains to be seen whether this shadow fleet of ships is big enough to allow Russia to buy and sell oil outside the cap, said Ben Cahill, a senior fellow at the Center for Strategic and International Studies, during a January panel discussion.“If that fleet is big enough for Russia to really operate outside the reach” of the Group of 7 countries, the cap probably “won’t have the kind of leverage that policymakers wanted,” Mr. Cahill said. “I think we should know within a couple of months.”Alan Rappeport More

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    David Lipton, Economic Diplomat, Will Step Down From Treasury

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    Mr. Lipton, who served in senior roles in the Clinton and Obama administrations and at the I.M.F., is retiring.WASHINGTON — David A. Lipton, a longtime figure in the field of international economics, is stepping down on Wednesday from his job as international affairs counselor to Treasury Secretary Janet L. Yellen, according to two Treasury Department officials familiar with his plans.Mr. Lipton, one of Ms. Yellen’s closest aides, is departing at a critical moment for the global economy. He has become a key negotiator in some of Ms. Yellen’s biggest policy issues. He was deeply involved in international discussions about a global minimum tax last year and has been at the center of the talks among the Group of 7 nations to impose a cap on the price of Russian oil.An economist by training with a doctoral degree from Harvard, Mr. Lipton, 69, has held senior economic policymaking positions in the Clinton, Obama and Biden administrations. He was also a top official at the International Monetary Fund, where he served as the deputy managing director.Last year, Ms. Yellen recruited Mr. Lipton to return to the federal government to help steer the Treasury Department’s international portfolio while President Biden’s nominees to lead the international affairs division were awaiting Senate confirmation.In a statement, Ms. Yellen described Mr. Lipton as one of her closest advisers and lauded his career.The Biden PresidencyHere’s where the president stands after the midterm elections.Beating the Odds: President Biden had the best midterms of any president in 20 years, but he still faces the sobering reality of a Republican-controlled House.2024 Questions: Mr. Biden feels buoyant after the better-than-expected midterms, but as he turns 80, he confronts a decision on whether to run again that has some Democrats uncomfortable.The ‘Trump Project’: With Donald J. Trump’s announcement that he is officially running for president again, Mr. Biden and his advisers are planning to go on the offensive.Legislative Agenda: The Times analyzed every detail of Mr. Biden’s major legislative victories and his foiled ambitions. Here’s what we found.“He will be irreplaceable for the department, but I feel incredibly fortunate to have had his counsel in my first two years,” Ms. Yellen said. “During that time, David has helped shape our international agenda across a wide set of challenges — from the recovery from the pandemic to our response to Russia’s war against Ukraine.”Mr. Lipton first met Ms. Yellen while a graduate student at Harvard, where he took her introductory course in macroeconomics. Lawrence H. Summers, who would serve as Treasury secretary during the Clinton administration, was also in the class, and he and Mr. Lipton became friends.After graduating from Harvard with a Ph.D. in economics in 1982, Mr. Lipton joined the I.M.F., where he worked for eight years on assignments that involved stabilizing the economies of poor countries.In 1993, after a stint working with the economist Jeffrey D. Sachs advising Russia, Poland and Slovenia on their transitions to capitalism, Mr. Lipton joined the Clinton administration’s Treasury Department. He was recruited by Mr. Summers, who was then the deputy Treasury secretary under Robert E. Rubin. He initially focused on Eastern Europe and the former Soviet Union before turning his attention to easing turmoil stemming from the Asian financial crisis in 1997.While President George W. Bush was in office, Mr. Lipton worked at Citigroup and at the hedge fund Moore Capital Management. He joined the Obama administration as an economic adviser. In 2011, Christine Lagarde named him her top deputy at the I.M.F. when the fund was spending billions of dollars to prop up Greece’s economy and as the economic tension between the United States and China was intensifying.Mr. Lipton’s second term at the monetary fund was cut short in 2020 when Kristalina Georgieva reshuffled its senior leadership. His position at the fund, which is usually decided by the United States, was filled by Geoffrey Okamoto, a former Trump administration official.A longtime proponent of the benefits of a global economy and multilateralism, Ms. Yellen persuaded Mr. Lipton to join her team as the Biden administration sought to mend international relationships that had been frayed during the Trump era.“David Lipton has been an insufficiently sung hero of the international financial system for the last 30 years,” Mr. Summers said in a text message. “His quiet strength and wisdom both prevented and resolved numerous crises.”Mr. Lipton, who grew up in Wayland, Mass., was a star wrestler in high school, serving as a co-captain for two years. At Harvard, he and Mr. Summers bonded over squash and economics.During remarks introducing Mr. Lipton at the Peterson Institute for International Economics in 2016, Mr. Summers described his former classmate as an economic “fireman in chief” who maintained a “keep hope alive” attitude when economic diplomacy got tough.Known for a dry wit that belies his earnest demeanor, Mr. Lipton expressed appreciation for the high praise but recalled that when he met Mr. Summers on the first day of school he initially had his doubts.“After talking to Larry for about 15 minutes, my reaction was, ‘If they’re all like that, I’m really in trouble,’” Mr. Lipton joked. More

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    What Price Is Right? Why Capping Russian Oil Is Complicated.

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    Officials from the Group of 7 are striving to strike a delicate balance that encourages Russia to keep pumping oil but to sell it at a discount.WASHINGTON — As the United States and its Western counterparts race to finalize the mechanics of an oil price cap intended to starve Russia of revenue and stabilize global energy markets, a crucial question remains unresolved: How should the price be set?The Group of 7 countries that formally backed the price cap concept this month are deliberating how much Russia should be allowed to charge for its oil as they prepare to release more details of the plan. It has emerged as a central question that could determine the success of the novel idea, Russia’s response and the trajectory of oil prices as winter approaches. Setting the price will require aligning the complex array of economic and diplomatic forces that govern volatile oil markets.The consequences of getting the oil price cap wrong could be severe for the world economy, and time is running short. The Biden administration fears that if the cap is not in place by early December, oil prices around the world could skyrocket given Russia’s outsize role as an energy producer. That’s because when a European Union oil embargo and a ban on financial insurance services for Russian oil transactions take effect on Dec. 5, the removal of millions of barrels of Russian oil from the market could send prices soaring.European financing and insurance dominate the global oil market, so the looming sanctions could disrupt exports to parts of the world that do not have their own embargoes — by making it harder or more expensive to get Russian oil at a time when energy costs are already high. The price cap will essentially be an exception to Western sanctions, allowing Russian oil to be sold and shipped as long as it remains below a certain price.The idea has won plaudits from economists who see it as an elegant win-win strategy for the West. But many energy analysts and traders have expressed deep skepticism about the concept. They believe that a fear of sanctions could scare financial services companies off Russian oil, and that Russia and its trading partners will circumvent the cap through new forms of insurance or illicit transactions.The impact of the proposed oil price cap and the potential for unintended consequences are two of the biggest quandaries facing the nations that have been enduring soaring inflation prompted by supply chain disruptions and Russia’s war in Ukraine.The leaders of the Group of 7 in June. In a joint statement this month, the group’s finance ministers said the “initial” price cap would be based on a range of “technical inputs.”Kenny Holston for The New York Times“We are looking at a far more complex oil market,” said Paul Sheldon, a geopolitical risk analyst at S&P Global Platts Analytics. “This is an unprecedented dynamic where you have such a large supplier of oil under unprecedented sanctions. We’re in new territory on several levels.”Exactly how the price cap will be set remains unclear.In a joint statement this month, finance ministers from the Group of 7 said the “initial” price cap would be based on a range of “technical inputs” and decided on by the group of countries that join the agreement. The Treasury Department’s Office of Foreign Assets Control said last week that the price cap would be determined by a “range of factors” and that countries that were part of the price cap coalition would make the decision by consensus. The coalition would be headed by a rotating coordinator from among the countries.A Treasury official said the process for setting the level of the oil price cap would constitute the next phase of the agreement, after technical details about enforcement had been decided and more countries had signed on to the coalition.The State of the WarDramatic Gains for Ukraine: After Ukraine’s offensive in the country’s northeast drove Russian forces into a chaotic retreat, Ukrainian leaders face critical choices on how far to press the attack.In Izium: Following Russia’s retreat, Ukrainian investigators have begun documenting the toll of Russian occupation on the northeastern city. They have already found several burial sites, including one that could hold the remains of more than 400 people.Southern Counteroffensive: Military operations in the south have been a painstaking battle of river crossings, with pontoon bridges as prime targets for both sides. So far, it is Ukraine that has advanced.An Inferno in Mykolaiv: The southern Ukrainian city has been a target of near-incessant shelling since the war began. Firefighters are risking their lives to save as much of it as possible.As U.S. officials think about setting the price cap, they are focused on two numbers: Russia’s cost of producing oil and the price that the commodity historically fetched on global markets before the war in Ukraine sent prices higher.The Biden administration realizes that Russia will not have an incentive to keep producing oil if a cap is set so low that Russia cannot sell it for more than it costs to pump it. However, setting the cap too high will allow Russia to benefit from the upheaval it has caused and blunt the cap’s ability to sufficiently curtail Russia’s oil export revenues.Before the war and the pandemic, Russian crude, known as Urals, typically sold for between $55 and $65 a barrel. Determining Russia’s cost of production is more complicated because some of its wells are more expensive to operate than others. Most estimates are around $40 per barrel.The price cap could settle somewhere among those numbers.Officials are also discussing whether shipping costs should be included in the cap or if it should just include the oil itself. Separate caps would be enacted for Russia’s refined oil products, such as gas oil and fuel oil, that are used for operating machinery and heating homes.A tanker with imported crude oil in China. The Biden administration hopes that even if China does not formally participate in the price cap the country will use it as leverage to negotiate lower prices with Russia.Agence France-Presse — Getty ImagesOil prices have hovered around $90 a barrel in recent weeks. Russian oil is currently selling at a discount of about 30 percent. Some analysts believe that designing the cap as a mandated level below global benchmark prices could be more effective since oil prices can swing sharply.“If you fix it at a certain level, that could create some risks because the market can fluctuate,” said Ben Cahill, a senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies, who noted that oil prices could fall below the cap level if it was set too high.“To increase the economic pain on Russia, you want to make the capped price substantially lower than the global average,” he said.As of now, the Treasury Department does not appear to support such an idea. The United States intends for the cap to be a fixed price — one that would be regularly reviewed and could be changed if the countries in the pact agreed to do so. The frequency of the reviews would depend on market volatility. Setting the cap at a discounted rate would introduce additional complexity and compliance burdens, the Treasury official said, because the cap rate could change hourly.Making sure the price cap is adhered to is another hurdle. Treasury Department officials have been holding discussions with banks and maritime insurers to develop a system in which buyers of Russian oil products would “attest” to the price that they had paid, releasing providers of financial services of the responsibility for violations of the cap.In its guidance last week, the Treasury Department said service providers for seaborne Russian oil would not face sanctions as long as they obtained documentation certifying that the cap was being honored. However, it did warn that buyers who knowingly made oil purchases above the price cap using insurance that was subject to the ban “may be a target for a sanctions enforcement action.”The impact of a price cap on global markets is difficult to predict. Mr. Cahill suggested that it could essentially create three tiers of crude, with some Russian oil being sold at the capped price, other Russian oil being sold illicitly or with alternative forms of financing and non-Russian oil being sold by other oil-producing nations.It is not clear how many countries beyond the Group of 7 will join the agreement. The Biden administration is hopeful that even if countries such as China and India do not formally participate they will use it as leverage to negotiate lower prices with Russia.Besides the oil cap’s price, the other big wild card is Russia’s response to it. Russian officials have said they will not sell oil to countries that are part of the price cap coalition, and analysts expect that the country will do its best to fan the volatility with some form of retaliation.The United States hopes that economic logic will prevail and that oil will keep flowing, albeit at a cheaper price.“Russia may bluster and say they won’t sell below the capped price, but the economics of holding back oil just don’t make sense,” Wally Adeyemo, the deputy Treasury secretary, said at a Brookings Institution event last week. “The price cap creates a clear economic incentive to sell under the cap.”Edward Fishman, a senior research scholar at the Center on Global Energy Policy at Columbia University, argued that the price cap could work because the incentives that it would create aligned most buyers, sellers and facilitators of oil transactions toward compliance. He suggested that global oil prices could end up organically gravitating toward the level of the price cap.However, Mr. Fishman acknowledged that Russia and its president, Vladimir V. Putin, might read the incentives differently.“There’s always a sliver of a doubt in people’s minds about Putin’s rationality and his willingness to set the global economy, and his own economy, ablaze in order to make a point,” Mr. Fishman said. More

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    Price Cap on Russian Oil Wins Backing of G7 Ministers

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    The proposal aims to stabilize unsettled energy markets in the wake of Russia’s invasion of Ukraine. But it faces considerable obstacles.WASHINGTON — Top officials from the world’s leading advanced economies agreed on Friday to move ahead with a plan to cap the price of Russian oil, accelerating an ambitious effort to limit how much money Russia can earn from each barrel of crude it sells on the global market.Finance ministers from the Group of 7 nations said they were firming up details of a price cap, with the aim of both depressing the price of global oil and reducing critical revenue that President Vladimir V. Putin is relying on to finance Russia’s war effort in Ukraine. The untested plan has been pushed by the Biden administration as way of keeping sanctions pressure on Russia while minimizing the impact on a global economy that has been saddled with soaring energy and food prices this year.Hours after the G7 ministers announced their plan on Friday, Gazprom, the Russian-owned energy giant, said it would postpone restarting the flow of natural gas through a closely watched pipeline that connects Russia to Germany, known as Nord Stream 1. The unexpected delay was attributed to mechanical problems with the pipeline, but it raised concerns that it was in retaliation for the price cap, an idea that Moscow has condemned.Eric Mamer, a spokesman for the European Commission, said that the “fallacious pretenses” for the latest delay were “proof of Russia’s cynicism.”The price cap still has many hurdles to clear before it can take effect, but its goal is to keep Russian oil flowing to global markets that depend on those supplies, while substantially reducing the profit Moscow reaps from its sales. Europe still consumes nearly two million barrels of Russian oil a day, though its imports have fallen since the war began, and the European Union is preparing to wean itself off those supplies by the end of the year.Officials are racing to put the price-cap plan in place by early December to try to limit the economic fallout from the new E.U. sanctions. They would ban nearly all Russian oil imports to the European Union and block the insurance and financing of Russian oil shipments.The Biden administration has become concerned that those moves could send energy prices skyrocketing and potentially tip the global economy into a recession if millions of barrels of Russian oil were suddenly yanked off the global market, drastically reducing the world’s supply of crude. U.S. administration officials have estimated that oil could soar to $200 a barrel or higher unless efforts to impose the price cap are successful.The initiative is a novel attempt to blunt the global economic impact of the invasion. Oil prices rose as fears of confrontation grew a year ago, and spiked when Russian troops entered Ukraine in February. They have receded in recent months, in part because much of Europe has tipped into recession, reducing global oil demand.Whether the price cap can work will hinge on a variety of factors, including securing agreement by all 27 E.U. member states and determining how the actual price would be set. Maritime insurers, which are critical to making the plan work, would also have to figure out how to comply in a way that allows them to continue insuring Russian oil cargo without running afoul of sanctions.The industry, which would be responsible for making sure that oil buyers and sellers were honoring the price cap, has warned that insurers lack the capacity to police the transactions. Financial services in Europe undergird international energy shipments around the world, and fully blocking their ability to deal with Russian oil could disrupt exports globally, even to countries that have not adopted Russian oil embargoes.The G7 finance ministers said in their statement that they intended to use a “record-keeping and attestation model” to track of whether oil transactions were below the price ceiling, and that they would try to minimize the administrative burden on insurers.A tanker at a crude oil terminal near Nakhodka. Maritime insurers would have to figure out how to comply with a cap in a way that allows them to continue covering Russian oil cargo.Tatiana Meel/ReutersRachel Ziemba, an adjunct senior fellow at the Center for a New American Security, said the agreement unveiled on Friday raised more questions than answers and suggested a challenging path ahead.“This sounds like something that is very technical and technocratic that is going to be hard to monitor and fully enforce,” Ms. Ziemba said.Understand the Decline in U.S. Gas PricesCard 1 of 5Understand the Decline in U.S. Gas PricesGas prices are falling. More

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    Seizing Russian Assets to Help Ukraine Sets Off White House Debate

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    WASHINGTON — The devastation in Ukraine brought on by Russia’s war has leaders around the world calling for seizing more than $300 billion of Russian central bank assets and handing the funds to Ukraine to help rebuild the country.But the movement, which has gained momentum in parts of Europe, has run into resistance in the United States. Top Biden administration officials warned that diverting those funds could be illegal and discourage other countries from relying on the United States as a haven for investment.The cost to rebuild Ukraine is expected to be significant. Its president, Volodymyr Zelensky, estimated this month that it could be $600 billion after months of artillery, missile and tank attacks — meaning that even if all of Russia’s central bank assets abroad were seized, they would cover only half the costs.In a joint statement last week, finance ministers from Estonia, Latvia, Lithuania and Slovakia urged the European Union to create a way to fund the rebuilding of cities and towns in Ukraine with frozen Russian central bank assets, so that Russia can be “held accountable for its actions and pay for the damage caused.”Confiscating the Russian assets was also a central topic at a gathering of top economic officials from the Group of 7 nations at a meeting this month, with the idea drawing public support from Germany and Canada.The United States, which has led a global effort to isolate Russia with stiff sanctions, has been far more cautious in this case. Internally, the Biden administration has been debating whether to join an effort to seize the assets, which include dollars and euros that Moscow deposited before its invasion of Ukraine. Only a fraction of the funds are kept in the United States; much of it was deposited in Europe, including at the Bank for International Settlements in Switzerland.Russia had hoped that keeping more than $600 billion in central bank reserves would help bolster its economy against sanctions. But it made the mistake of sending half those funds out of the country. By all accounts, Russian officials were stunned at the speed at which they were frozen — a very different reaction from the one it faced after annexing Crimea in 2014, when it took a year for weak sanctions to be imposed.Those funds have been frozen for the past three months, keeping the government of President Vladimir V. Putin from repatriating the money or spending it on the war. But seizing or actually taking ownership of them is another matter.At a news conference in Germany this month, Treasury Secretary Janet L. Yellen appeared to close the door on the United States’ ability to participate in any effort to seize and redistribute those assets. Ms. Yellen, a former central banker who initially had reservations about immobilizing the assets, said that while the concept was being studied, she believed that seizing the funds would violate U.S. law.Treasury Secretary Janet L. Yellen has cautioned against seizing Russian central bank assets to help pay for Ukraine’s reconstruction.Ina Fassbender/Agence France-Presse — Getty Images“I think it’s very natural that given the enormous destruction in Ukraine and huge rebuilding costs that they will face, that we will look to Russia to help pay at least a portion of the price that will be involved,” she said. “It’s not something that is legally permissible in the United States.”But within the Biden administration, one official said, there was reluctance “to have any daylight between us and the Europeans on sanctions.” So the United States is seeking to find some kind of common ground while analyzing whether a seizure of central bank funds might, for example, encourage other countries to put their central bank reserves in other currencies and keep it out of American hands.In addition to the legal obstacles, Ms. Yellen and others have argued that it could make nations reluctant to keep their reserves in dollars, for fear that in future conflicts the United States and its allies would confiscate the funds. Some national security officials in the Biden administration say they are concerned that if negotiations between Ukraine and Russia begin, there would be no way to offer significant sanctions relief to Moscow once the reserves have been drained from its overseas accounts.Treasury officials suggested before Ms. Yellen’s comments that the United States had not settled on a firm position about the fate of the assets. Several senior officials, speaking on the condition of anonymity to discuss internal debates in the Biden administration, suggested that no final decision had been made. One official said that while seizing the funds to pay for reconstruction would be satisfying and warranted, the precedent it would set — and its potential effect on the United States’ status as the world’s safest place to leave assets — was a deep concern.In explaining Ms. Yellen’s comments, a Treasury spokeswoman pointed to the International Emergency Economic Powers Act of 1977, which says that the United States can confiscate foreign property if the president determines that the country is under attack or “engaged in armed hostilities.”Legal scholars have expressed differing views about that reading of the law.Laurence H. Tribe, an emeritus law professor at Harvard University, pointed out that an amendment to International Emergency Economic Powers Act that passed after the Sept. 11, 2001, terrorist attacks gives the president broader discretion to determine if a foreign threat warrants confiscation of assets. President Biden could cite Russian cyberattacks against the United States to justify liquidating the central bank reserves, Mr. Tribe said, adding that the Treasury Department was misreading the law.“If Secretary Yellen believes this is illegal, I think she’s flatly wrong,” he said. “It may be that they are blending legal questions with their policy concerns.”Mr. Tribe pointed to recent cases of the United States confiscating and redistributing assets from Afghanistan, Iran and Venezuela as precedents that showed Russia’s assets did not deserve special safeguards.Russia-Ukraine War: Key DevelopmentsCard 1 of 4On the ground. More