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“Ukraine needs frozen Russian assets, not a frozen conflict”: why it is essential to make Russia pay for the war it started

On January 24, 2024, a U.S. Senate committee approved legislation that would help create the conditions for the United States to confiscate Russian assets and transfer them to Ukraine to rebuild after the devastation caused by nearly two years of Russia’s full-scale invasion and ten years of war.

And the US is not the only one considering this possibility. Discussions about the transfer of frozen Russian assets, which currently total about $300 billion in Europe, Asia, and the United States, have been ongoing since early 2022 after Russia’s full-scale war against Ukraine began.

Participants of the #MAKERUSSIAPAY action in Spain “billed” Russia for crimes in Ukraine. February 25, 2024.
Photo: International Centre for Ukrainian Victory

The Russian Central Bank held half of its assets abroad. After February 24, 2022, these assets were frozen as a result of sanctions. This also affected the funds of Russian oligarchs close to Vladimir Putin.

The issue of transferring these funds to Ukraine is acute, but it requires a collective decision by G7 and EU countries based on the norms of international law. However, there is no moral dilemma as to who should pay for the damage done.

Aggressors pay, but when?

During the Weimar Republic, Germany began paying reparations after its defeat in World War I. After the loss in World War ІІ, additional payments were imposed on the Germans even though they had not paid the previous ones. Germany paid compensation for World War І only in 2010, more than 90 years after the end of the war. 

Thus, there are precedents of successful and complete payment of reimbursement. Iraq paid for the occupation of Kuwait, and the basis for the payment was UN Security Council resolutions. 

However, Ukraine cannot wait 90 years for reparations or even hope that Russia will pay them voluntarily: Ukrainians have defense needs to finance now and entire cities to rebuild.

“Russia has destroyed more than 350,000 objects and millions of square meters of residential, educational, medical, and sports infrastructure, thousands of kilometers of roads and railways, airports, ports and even entire cities. The Russian occupiers also damaged 1,702 objects of Ukraine’s cultural heritage and cultural infrastructure, including 601 libraries and 99 museums and galleries,” informed Yevhenii Tsymbaliuk, Permanent Representative of Ukraine to international organizations in Vienna.

Problem and solutions

Аccording to lawyers and legal scholars, confiscation can be not only fair but also legal. International law requires the aggressor to compensate for the damage caused by its armed aggression. The U.N. Articles on the Responsibility of States for Internationally Wrongful Acts allow for such countermeasures.

Some experts are still duplicating the Russian narrative that the confiscation of the aggressor’s frozen assets and their transfer to Ukraine could destabilize the situation in the Western financial system and international finance.

“However, reputable experts have already dismissed these fears. And we’re actively working with our partners, as a collective decision by the G7 and EU countries would also further minimize any such risks. But there’s another point to emphasize: by confiscating Russian assets, other countries might think twice before they mount any similar acts of aggression,” Dmytro Kuleba, Minister of Foreign Affairs of Ukraine, stated in his column for Politico.

The options that partner countries have discussed as of today include seizing the assets directly and transferring them to Ukraine, using interest earned and other profits from the assets in European financial institutions for Ukraine’s benefit, or using the assets as collateral for loans to Ukraine.

The first precedent for using taxes on profits generated by frozen Russian assets in favor of Ukraine was set by Belgium. Most of the Central Bank of Russia’s funds are frozen in Belgium – 180 billion euros – and are blocked in the accounts of the Belgian Central Securities Depository – Euroclear.

In October 2023, the Belgian government announced it would set up a special fund to support Ukraine, filled with taxes from Russian assets frozen in the country. The fund will amount to approximately €1.7 billion and will be used to provide military and humanitarian aid to Ukraine and macro-financial assistance.

President of Ukraine Volodymyr Zelenskyy and Belgian Prime Minister Alexander De Croo in Brussels. October 11, 2023.
Photo: Office of the President of Ukraine

Steps to take now

Ukraine continues to work actively with the partner states on the issue of transferring these frozen assets to Ukraine and Ukrainian citizens. 

“All Russian assets – those of the state terrorist and associated individuals – frozen in various jurisdictions should work to protect against Russian aggression. They must be confiscated. We are doing everything to ensure that this decision is well-prepared in the near future. Thank you to everyone who is helping us advance this mechanism of justice”, Volodymyr Zelenskyy said in his evening address on January 27, 2024.

In particular, essential steps were taken in the EU. In December 2023, the European Commission praised the proposal to use the proceeds of Russia’s frozen assets in favor of Ukraine with the aim of eventually raising 15 billion euros. On January 29, 2024, European Union ambassadors agreed on a proposal to use those profits.

As the European Council spokesperson explained, the EU proposal stems from the situation in which, after the immobilization of the Central Bank of Russia’s assets in European countries, central depositories were forced to put some of these assets, generating income, into banks. These revenues are planned to be used to help rebuild Ukraine.

Canada has also provided for the possibility of using the confiscated assets of sanctioned persons to support Ukraine. In addition, a bill is being considered to seize the sovereign holdings of offending states, including Russia.

The British Parliament is considering a bill to confiscate the assets of the Russian Federation, which amount to about €21 billion, and the Estonian Parliament is also working on drafting a law that would allow for the confiscation of Russia’s frozen assets. On March 7, 2024, the upper house of the Swiss parliament approved measures allowing the use of Russian assets for Ukraine’s reconstruction: about $8.8 billion of Russian state assets have been frozen in the country.

It will help Ukraine but not only

The transfer of frozen Russian assets will generate critically needed funds to assist Ukraine’s recovery and defense. This will also send a powerful message to the entire international community.

“We need Russia’s frozen assets, not a frozen conflict. This should be the way forward to send a clear signal to the world: if you dare to break the rules, you will have to pay for it. If we don’t clarify this now, the number of interstate conflicts and crises worldwide will increase, and the cost of resolving them will be much higher than the price of helping Ukraine,” said Dmytro Kuleba, Minister for Foreign Affairs of Ukraine.

There is no moral dilemma here: Ukraine needs to rebuild everything that Russia has destroyed, and the aggressor must pay for it. As of December 31, 2023, the total cost of reconstruction and recovery in Ukraine is estimated at $486 billion, and direct losses in Ukraine have so far reached almost $152 billion, with the most affected sectors being housing, transportation, trade and industry, energy, and agriculture.

The confiscation and transfer of frozen assets is a practical way to make the compensation happen in the foreseeable future.

“This is a historic opportunity to make the terrorist state pay for its terror,” President of Ukraine Volodymyr Zelenskyy wrote. “Russia’s elites and leadership do not care about human lives, but they do care about money. The loss of assets will be their most painful loss. They will feel the true strength of the international community and see that the world is stronger than terror.”