Why Giving Ukraine $300 Billion In Seized Russian Assets Makes Sense Now

The assets are available. Legal and financial experts have okayed the right to seizure and transfer. And the money is needed as right wing politicians, some of who are recipients of Russian support, hold up aid that majorities in the US and Europe approve. 

But the greatest argument may be that the consequences have probably never been lower. Russia has shown itself at its worst. Its own economy is limping under the weight of military pressure so has scant ability to retaliate. The US economy is booming and Europe's is stable. But China, who some erroneously fear might want to supplant the dollar as the world's global currency of choice, is struggling economically so does not wield the power it did even two years ago. And it can no longer afford to risk alienating the western economies on which its own well-being depends. The time to make Russia pay for the war with its own assets is now. JL

Anne Applebaum reports in The Atlantic:

In a team of lawyers published a 187-page report making the “legal, practical, and moral case” for transferring Russian assets to Ukraine. The moral argument is: Russia should pay for the damage it has done to Ukraine. The legal case rests on the many treaties Russia broke by invading Ukraine, destroying cities, murdering civilians, deliberately damaging power grids and grain storage. Russian money rightly compensates Ukrainians for the harm Russia has done, and help rebuild the infrastructure Russia destroyed. There isn’t an alternative reserve currency to the dollar now, or anywhere safe outside the Western-dominated financial system for investors to go.

A majority of Americans and a majority of Congress want to help Ukraine win the war against Russia, and to stop the spread of autocracy into Europe. A majority of people in the European Union and a majority of EU leaders want the same. But small minorities of lawmakers—some inspired by Russian President Vladimir Putin or his money, some bent on bargaining for other things—have managed to block or delay that aid.

On both sides of the Atlantic, the crunch has arrived. The far-right faction that now controls the Republican Party captured the House last year and has successfully blocked a new spending bill for many months.The prime minister of Hungary, himself a de facto autocrat, is also blocking an EU financial package for Ukraine. Eventually the European prime ministers and the Biden administration alike may well do deals and allocate the money. But in the meantime—and just in case they fail—there is something else that American and European governments can do.

At the very beginning of the conflict, the U.S., the EU, the United Kingdom, and other democratic governments jointly froze more than $300 billion in Russian sovereign assets, mostly in Europe. This is money that Russia cannot sell or borrow against. Nor can Russia make use of any of the interest this money earns. At the time, many believed that the decision to freeze these assets would shock the Russian government into pulling back. That did not happen. After nearly two years, the countries that hold these assets—all of them—should take the next step and transfer the money to Ukraine.

Laurence Tribe, the American constitutional scholar, has been promoting this idea for some time. In September, he and a team of lawyers published a 187-page report making the “legal, practical, and moral case” for transferring Russian assets to Ukraine. The moral argument is the easiest: Russia should pay for the damage it has done to Ukraine. The fundamental legal case, Tribe told me, rests on the many treaties that Russia broke by invading Ukraine, destroying whole cities, murdering civilians, deliberately damaging power grids and grain storage. By doing so, Russia lost any standing to complain about the violation of its sovereignty or property rights, since it denies those to Ukraine.

In truth, we in the West already crossed that bridge when we froze the assets in the first place. “If you have the authority to freeze the assets,” Tribe told me, “you have taken them away from the sovereign that claimed to be their owner. Why should they now have to lie idle while a country is decimated?” The frozen assets would solve some of Ukraine’s immediate budgetary and financial problems. More important, $300 billion is a reasonable down payment on the reparations that Russia should pay to Ukraine. Russian money should rightly compensate Ukrainians for the harm that Russia has done, and help rebuild the Ukrainian infrastructure that Russia destroyed.

The strongest Western objections to transferring the frozen Russian money to Ukraine have been practical ones. Tribe cited an “inchoate concern that hegemony of the dollar will be threatened, and people’s willingness to park reserves in the U.S. and other Western countries will be jeopardized.” Some countries may fear that their own assets could be at risk if kept in Western financial institutions, and will instead place them in China or elsewhere. A handful of Europeans fear that redistributing the money would set a precedent, encouraging others to take their own national assets. A range of public officials, including former Treasury Secretary Larry Summers and former World Bank President Robert Zoellick as well as David Cameron, the new British foreign secretary and former prime minister, have nevertheless argued in favor of the seizure. There isn’t an alternative reserve currency to the dollar right now, or anywhere safe outside the Western-dominated financial system for investors to go. Besides, as Tribe’s report argues, “assisting Ukraine in its time of need is worth the speculative risk to the dollar.”

This part of the argument has more significance now than it did in September, when Tribe and his colleagues published their report, because the stakes for Ukraine are higher and the need to take risks is greater. The crisis in Western funding—a crisis caused, I repeat, by pro-Russian politicians and factions in our own societies, some of whom are coordinating their activity with Russia—is now acute. It is also visibly emboldening Putin, who last week gave a press conference restating his goal in Ukraine, which is the same as it was two years ago: the destruction of the Ukrainian state. The dysfunction in Washington and Brussels is bolstering Putin’s belief that he will win the war simply by waiting for the West to give up.

 

Handing $300 billion of Russian assets to Ukraine will put a dent in this confidence. It will show Putin that the West is willing to take creative, even unprecedented, measures to win the war. It will also be popular, not only in Ukraine but in the U.S. and Europe. Most people will intuitively understand the fairness of making Russia pay for its own acts of vandalism. Whatever reputational damage this transfer of assets might cause for the West, it is vanishingly small in comparison with the reputational damage that the West will suffer if Russia succeeds in conquering Ukraine. The sooner we make this decision, the more quickly the impact will be felt on the ground. What are we waiting for?