Release trapped Russia funds now to aid Ukraine

For 15 years, across four administrations, there has been a logjam over $150 million in left-over monies from an investment fund for Russia, caught between Congress and the executive branch. Both should release the money to respond to the humanitarian crisis in Ukraine right now and to support Russian civil society.

The U.S.-Russia Investment Fund (TUSRIF) was established in 1995 to promote the development of a free market economy in Russia by fostering the growth of entrepreneurial companies. TUSRIF was one of 10 “enterprise funds” that were set up in Central and Eastern Europe and in the former Soviet Union. My colleagues and I have written extensively about enterprise funds. TUSRIF was financially very successful. Initially, Congress appropriated approximately $330 million of public funds to TUSRIF; through the 1990s and early 2000s, TUSRIF put those monies — plus the profits that it made on investments, more than $1 billion — into Russia’s economy, when we hoped that Russia would become a successful democracy.

Unfortunately, Russia became an authoritarian regime, and diplomatic relations between Russia and the United States are close to the breaking point.

The remaining profits generated by TUSRIF became frozen starting in 2007. There are $150 million dollars sitting in an account in the U.S. Treasury Department from TUSRIF. The question has been: “How should the U.S. spend that money?”

The events of the last week should upend all the reasons to hold up spending this money.

The best use of this money would be to spend most of it on Ukrainians fleeing the Russian invasion, and some of it supporting Russian civil society. There have been protests in various cities in Russia against the war in Ukraine; it may sound crazy, but we should maintain hopes that someday Russia will have a different kind of government.

Three big questions that had complicated releasing this money were: 1) How much of the profits should go back to the U.S. Treasury? 2) How much of the money should go to Russia related activities? 3) How much of the monies might go to countries in Russia’s near abroad impacted by Russian aggression? The answers to these questions are now different given what has happened this week.

On the first question, other successful enterprise funds had agreed to split the “reflows” (e.g. the profits from the investment that were not originally contemplated in the original enterprise legislation): 50 percent into a legacy foundation focused on U.S. and Russia partnership and 50 percent back to the Treasury.

So, when TUSRIF began to liquidate its assets in 2004, it was agreed that 50 percent of the proceeds would be used to establish a legacy foundation — the U.S.-Russia Foundation for Economic Advancement and the Rule of Law (USRF) — while the other 50 percent would return to the U.S. Treasury. USRF was set up with an endowment of more than $100 million with some of the profits and registered in the U.S. as a nonprofit corporation in 2008. President Putin also agreed to register USRF in Russia, and the Moscow office opened in 2009. USRF had to relocate to Washington in 2015 and manages programming from here.

On the second…