December 5, 2022
Ukraine’s foe is Russia, but its allies face political and funding fatigue as billions flow to stop Putin. Feeding concerns is that the U.S. House of Representatives is now Republican-controlled, with some members against “sending another penny” to Ukraine’s war effort. There are also small cracks in Europe’s solidarity which arose during the recent Official State visit of France’s Emmanuel Macron to the White House. Macron has privately urged Ukraine to negotiate with the Kremlin and publicly urged President Joe Biden to talk with Putin, who agreed to do so if Putin was willing to end the invasion. But Kremlin spokesman Dmitry Peskov rejected that immediately. With no end to the war in sight, the priority is to make Putin pay for the war he started. The G7 and allies froze an estimated $350 billion in Russian Central Bank reserves after the invasion, and pursue billions more in offshore assets owned by Russian oligarchs. All these funds must be legally confiscated and earmarked to finance Ukraine’s defeat of Moscow and to pay for the country’s reconstruction.
“Russia’s war of aggression has caused Ukraine great costs for no permissible reason,” wrote economist, advisor, and Russian expert Anders Aslund in the Kyiv Post. “Ukraine and its Western friends need to get serious about Russian war reparations. The countries that hold these reserves should first of all announce how much they hold and secondly legislate to confiscate these funds and ring-fence them for Ukraine’s reconstruction. And the Ukrainian government should make this their top demand.”
Some Americans oppose confiscation because it would discourage countries from keeping their reserves in U.S. dollars, out of fear that in future conflicts the United States and its allies would confiscate the funds of any enemy, competitor, or opponent. Despite some doubters, members are pursuing seizure of these frozen funds across the Alliance. There is no question that these central bank assets legally “belong” to Russia, but there is also no question that these should be transferred to Ukraine as reparations for its unprovoked invasion, war crimes, and ongoing terrorism toward civilians. There is also a precedent for this – Iraq’s unprovoked invasion of Kuwait in 1990 cost its treasury $52.4 billion in reparations drawn out of its frozen funds in central banks elsewhere. There is international justification for this as well: On November 14, the United Nations General Assembly adopted a resolution (with 94 votes against 14 and 73 abstentions) to hold Russia accountable for its actions and to compel it to pay war reparations to Ukraine.
The UN resolution states: “The Assembly recognizes that the Russian Federation must be held to account for any violations of international law in or against Ukraine, including its aggression in violation of the Charter of the United Nations, as well as any violations of international humanitarian law and international human rights law, and that it must bear the legal consequences of all of its internationally wrongful acts, including making reparation for the injury, including any damage, caused by such acts.”
Canada is the first country that has revamped its sanctions laws to enable confiscation of frozen public and private assets alike, but not enacted them as yet. The amount of frozen Russian assets in Canada is unknown, likely tens of billions, and the Canadian government has not yet indicated which of the international law justifications for the seizure of Russian state-owned assets it will rely on, but Professor Robert Currie has pointed to third-party countermeasures as the likely option.
There is plenty of money to seize from Russians in retaliation for its genocidal war. In addition to the frozen $350 billion in central banks, some estimate another $1 trillion in assets belong to Russian oligarchs, including Putin, abroad. Countries have been seizing yachts and mansions and portfolios, but the rest is hard to obtain. The vast majority of assets remain buried behind byzantine corporate structures, proxies, family members, trustees, Swiss bankers, and the veils provided by the world’s dirty money secrecy havens. Fortunately, the Central Bank stash is already frozen and should be deployed as soon as possible toward helping Ukraine fight Putin.
American businessman William Browder has joined others in lobbying for this solution. He undertook a similar crusade against Putin and his cronies years ago, and convinced dozens of nations to pass the “Magnitsky Act”, named after Browder’s lawyer who was murdered in a Russian jail. This Act authorizes governments to sanction foreign government officials worldwide who are deemed to be human rights offenders. “Legal objections have been raised about this [central bank asset] transfer” said Browder in an interview with me recently in Toronto, “but it is Russian government money, it launched the war, and the seizure is punishment, not a legal issue. This would make the most material difference for Ukraine going forward, to get this $350 billion. It would also silence those politicians concerned about the flood of money out of NATO countries to pay for a war to stop Putin.”
European Commission President Ursula von der Leyen stated that the EU is working on reparations. “We are working on the legal framework so that the assets of Russia and partly the assets of oligarchs can be used to restore Ukraine,” she said.
Aslund said the US and EU are toying with draft laws, but nothing has come to fruition. The need is urgent for Ukraine because the war must be won for the sake of the global economy. According to the World Bank “disruptions to economic flows and production, as well as additional expenses associated with the war, amount to some $252 billion”.
Consensus is that the slight majority of Republicans in the House of Representatives will only slow, and possibly pare back slightly, future allocations to Ukraine but not stop them. However, the Kremlin is stoking worries. Its mouthpiece, RT, recently crowed that “The Pentagon may run out of money for Ukraine.” The big test will be this month’s $1.7-trillion annual funding request by the U.S. Department of National Defence which includes $37.7 billion for Ukraine’s defence. Of the House’s 435 members, 57 Republicans voted against the last standalone aid package to Ukraine. Another 30 Progressive Democrats wrote, then withdrew, a letter requesting that Biden insist that Kyiv agree to negotiations to end the conflict.
This is why confiscation must be enacted immediately, wrote Aslund. “Russia’s war of aggression has caused Ukraine [and the world] great costs for no permissible reason. These funds
are the indisputable state property of the Russian Federation, which is directly responsible for war crimes in Ukraine. The legal case for confiscation is strong and enacting it would require a minimum amount of administrative and legal work. There are no private property rights involved, nor is there any doubt about ownership. Each country that holds Russian Central Bank reserves should declare them now. They should also adopt a special law for the confiscation of such assets and their transfer to Ukrainian reconstruction.”
Putin must pay.