(Bloomberg) -- US Treasury Secretary Janet Yellen called on the world’s largest advanced economies to find a way to “unlock the value” of immobilized Russian assets to help bolster Ukraine’s defense against Russia’s invasion and for long-term reconstruction after the war. 

“There is a strong international law, economic and moral case for moving forward,” Yellen said Tuesday in Sao Paulo in remarks before meeting with counterparts from the world’s top economies. “The G-7 should work together to explore a number of approaches that have been suggested.”

Her comments come as Group of Seven nations are debating what to do with sovereign assets that were frozen at the outbreak of the invasion, with Ukraine’s financing needs remaining persistently high and the war now in its third year with no sign of abating.

The European Union, G-7 nations and Australia have frozen about €260 billion ($282 billion) in the form of securities and cash, with more than two-thirds of that immobilized in the EU. The parties all agree that those funds should remain off-limits to Russia unless it agrees to assist in Ukraine’s reconstruction, but they’re at odds over the legality of seizing the assets outright.

Yellen said that beyond simply seizing the assets, other ideas include using them as collateral to borrow from global markets.

Unlocking the assets to help Ukraine “would be a decisive response to Russia’s unprecedented threat to global stability,” Yellen said. “It would make clear that Russia cannot win by prolonging the war and would incentivize it to come to the table to negotiate a just peace with Ukraine.”

Responding to Yellen’s comments at a press conference in Sao Paulo on Tuesday, Russian Finance Minister Anton Siluanov said the US plan is “destructive” because it makes countries’ reserves susceptible to political decisions. He said Russia can respond “because we have frozen on our side a sizeable amount of foreign assets.”

In an interview at the G-20, Siluanov also said that the rhetoric about asset freezes is undermining “trust in the reserve currencies.”

In the wake of the freezing of Russian assets and far-reaching sanctions on the country, a number of emerging nations have called for reducing the role of the dollar in global trade and finance. But Yellen in her remarks Tuesday suggested little concern on that front.

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Group Effort

“Realistically there are not alternatives to the dollar, euro, yen, so I’m not too worried about that,” she said. “With regard to financial stability I suppose a risk would arise if there were a massive shift away from currencies, but I think that is extremely unlikely — especially given the uniqueness of this situation, a situation where Russia is brazenly violating international norms.”

The Treasury chief noted that the US didn’t move unilaterally to capture Russia’s assets. “A group of countries representing half of the global economy and all of the currencies that really have the capacity at this point to serve as reserve currencies, we all act together.”

Discussions on using Russian assets have intensified as President Vladimir Putin’s forces gain momentum on the battlefield. As Republicans in Washington continue to set hurdles for new aid for Kyiv, the Biden administration is keen to offer Ukraine another important signal of its support.

The US and UK have been pushing G-7 allies to seize the central bank assets outright, but the group’s European members, especially France and Germany, are currently opposed to the move over legal concerns and worries that it could damage the stability of the euro as well as set a dangerous precedent. 

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The position of EU member states is crucial as the vast majority of the funds are in Europe, mostly at the Belgium-based clearing house Euroclear. The clearing house and the European Central Bank are both skeptical of the right to seize the assets. 

Still, G-7 nations are discussing options. Among the ideas under discussion is using the funds as collateral to raise debt or as guarantees for loans.

The EU is slowly making progress on plans to at least apply a windfall tax to the profits generated by the immobilized funds. Last year, the funds enabled profits of €4.4 billion.

--With assistance from Martha Beck.

(Updates with Russian minister’s comments in seventh paragraph. A previous version of this story was corrected to reflect the assets were frozen not seized.)

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