EXPLAINER: Minnesota to divest from Russia over Ukraine war
By STEVE KARNOWSKI Associated Press
ST. PAUL, Minn. (AP) — Minnesota state government will divest its assets in Russia to show its solidarity with the people of Ukraine, a bipartisan expression of moral outrage that supporters say is worth the cost.
The Minnesota Senate voted 67-0 Tuesday to mandate that the state sell off its investments in Russia and neighboring Belarus, which has supported Russia’s month-old war in Ukraine. Those assets are mostly held by the state’s public employee pension funds.
“It is extremely important that we show Ukraine we stand with them in joining an ever-growing number of democracies in standing up to the atrocities happening in the Ukraine,” said the bill’s chief author, Republican Sen. Karin Housley, of Stillwater, who was dressed in Ukrainian blue and yellow.
The unanimous vote, which followed unanimous approval in the House last Thursday, sends the bill to Democratic Gov. Tim Walz for his signature. Here’s a look at the issues involved:
THE BIG PICTURE
Minnesota is one of several states across the country that have joined the movement to put additional economic pressure on Russia on top of the sanctions ordered by the federal government and other countries opposed to the war in Ukraine.
The effect of sanctions imposed by U.S. states often pales in comparison to national and international sanctions, but states are doing what they can.
The Ukrainian American Community Center in Minneapolis says around 17,000 Ukrainians reside in Minnesota, from recent immigrants to third-generation Americans of Ukrainian descent.
Democratic Sen. Kari Dziedzic, whose northeast Minneapolis district is the historic heart of the local Ukrainian American and East European community, said Ukrainians have experienced freedom and democracy since their country became independent in 1991.
“They don’t want to go back,” said Dziedzic, a granddaughter of Polish immigrants. “They want to remain independent.”
Minnesota’s public employee pensions funds had an estimated $53 million worth of investments in Russia before its invasion of Ukraine. The value of those investments has fallen to less than $10 million, Democratic Rep. Sydney Jordan, of Minneapolis, said during the House debate last week.
But Republican Sen. Mary Kiffmeyer, of Big Lake, said those holdings “are in essence right now worthless. You can’t sell them, you can’t buy them.” She said the bill language also protects the interests of retirees.
“Pension holders do not want to fund their retirement from the bloodshed,” Housley said.
Divestment isn’t expect to cost the state much more than what the state’s investments already have lost in value since Russia invaded Ukraine a month ago.
And they’re just a small part of the state’s overall portfolio, which is controlled by the Minnesota Board of Investment. The board was managing assets with a market value of $135.7 billion as of Dec. 31 and has consistently earned high rates of return in recent years, including 18% last year for its largest combined pension fund.
HOW IT WILL WORK
The bill requires the board to liquidate all directly held, publicly traded assets of companies and governmental entities that have their principal places of business in Russia and Belarus. To the extent practicable, the board must liquidate half of those assets within nine months of the Aug. 1 effective date, and all of them within 15 months of that date.
There are exceptions for any assets that have been excluded from federal sanctions, such as companies providing humanitarian goods and services. The board doesn’t have to divest indirect holdings, such as via mutual funds, but the state’s money managers must ask those funds to unload any Russian and Belarusian securities they hold.
THE GOVERNOR’S POSITION
Walz supports the legislation, which follows an executive order he signed earlier this month that prohibits state government from doing business with Russian companies, and directed more than two dozen agencies to terminate their contracts.