Leading economy and legal experts discuss the formula by which Russia’s frozen assets can be used to support and rebuild Ukraine.
It is unlikely that any of the world’s analysts can predict the end date of the war in Ukraine as Russian troops are still on occupied territories and the Kremlin forces continue to bombard Ukrainian cities.
However, most of the experts agree that its outcome is predetermined: Russia, which started the war, must bear the burden of political and economic responsibility. Frozen Russian assets must be used to rebuild Ukraine.
According to various estimates, the amount of compensation required for Ukraine ranges from $350 billion to more than $1 trillion.
A report published by the New Line Institute entitled “Multilateral Asset Transfer: A Proposal for Securing Reparations for Ukraine” detailed the concept of transferring Russian funds frozen outside of Russia to rebuild Ukraine.
The Atlantic Council’s Eurasia Center responded to the New Line Institute’s initiative and invited the authors of the report to discuss the proposals contained in it.
Why is it urgent to discuss the issue of compensation today? Azeem Ibrahim, Senior Director at the New Lines Institute, gave a simple example:
“Iraq has paid $52 billion in compensation to Kuwait. However, the last payment was made only in 2022. This resulted from Iraq’s complete defeat and the victory of the international coalition. Its troops occupied Iraq. And the payment of these compensations was authorised by the UN Security Council. However, it is unlikely that any of these three things will happen in the case of Russia. Russia will not be defeated by an international coalition. It will not be occupied. And the Security Council, of which Russia is a member, will not do so either. Therefore, alternative models need to be developed now to ensure that Russia pays for its aggression.”Azeem Ibrahim
How can Russia’s funds be used to compensate Ukraine for the destruction caused by the war?
Having worked in various positions at the World Bank and the US Department of Justice, Yulia Ziskina of Razom for Ukraine believes Russia “is obliged to pay for the damage it has caused to Ukraine not only for ethical and moral reasons”.
“There is a legal basis for this: the principle of international responsibility of states,” said one of the report’s authors.
The expert explained that “most people, when talking about compensation and reparations, think in the paradigm of sanctions, not in the paradigm of countermeasures.
“As we have seen, sanctions alone are not enough. Russia stops the war and starts negotiations. Thus, this paradigm no longer works. We need to move to the paradigm of countermeasures”.Yulia Ziskina, legal advisor at Razom for Ukraine
She explained that “countermeasures are codified in the articles of the UN International Law Commission on State Responsibility”.
Countermeasures are applied in two circumstances: the need for a harsh response to a country’s illegal actions and the importance of achieving a specific legal goal in international politics.
“Firstly, the unlawfulness of the actions is obvious,” said Yulia Ziskina, “there are two resolutions of the UN General Assembly, the latter of which calls on member states to develop a mechanism of reparations and compensation for Ukraine. And there is the decision of the International Court of Justice. Secondly, the specific goal is clear: to end the bloody, unprovoked war.”
The expert is convinced that the international community “has every right to take countermeasures: this is a response to Russia’s ongoing crimes against humanity.”
“Initially, the funds will be transferred to domestic escrow accounts. Thus, each country that has frozen Russian assets, such as the United States, European countries, or the United Kingdom, will consolidate, transfer and isolate the money within the country,” explained Yulia Ziskina.
As Yulia Ziskina explained, countermeasures are “an extrajudicial process within the framework of legitimate domestic acts of the state, i.e. the executive branch”.
Philip Zelikow, a former adviser to US Secretary of State Condoleezza Rice, a professor at the University of Virginia and another of the report’s authors, said that as an argument against countermeasures, their opponents usually suggest referring the issue to the International Court of Justice.
However, according to the researcher, everyone will face four problems here:
“This court works very slowly, its decision will be uncertain for a long time, this way of obtaining funds for compensation is unreliable, as Russia will simply refuse to pay under the court’s decision, and finally, it is a process completely driven by mutual claims.”Philip Zelikow, Former adviser to US Secretary of State, Professor at the University of Virginia
According to Zelikov, countermeasures are already possible, as Russia has “confiscated the property of many Western companies: from aircraft to automotive and heavy machinery production equipment”.
Mechanism for the distribution of funds to Ukraine
Zelikov described in detail the mechanism of allocation of funds received after the application of countermeasures.
He is confident that “some preliminary steps should be taken right now” by transferring Russian assets to “escrow accounts”: “notify Russia and start building international mechanisms led by the IMF and the World Bank to distribute the funds”.
Zelikov described what the process of accumulation and distribution of funds for Ukraine would be based on:
“Firstly, it is a coordination platform to ensure joint coordinated political leadership of the G7 countries. Secondly, it is a financial plan of international financial institutions to distribute these funds. Thirdly, it is the creation of something like an “economic cooperation administration”, such as the one that the West used to manage the European reconstruction programme between 1948 and 1952.”
What is the political cost of acting or not acting on using Russian funds to compensate Ukraine?
Ambassador John Herbst, Senior Director at the Atlantic Council’s Eurasia Centre, explained in detail the current situation in the world and the importance of addressing this issue.
He explained that the system, which includes the UN, international financial institutions, the EU, and even NATO, and which has provided nearly 80 years of post-war prosperity and peace, reducing the percentage of the world’s poor from 70% in 1950 to 9% today, is being seriously challenged.
“After the devastating Second World War, which claimed the lives of 100 million people and left Europe in ruins, the same terrible prospect is emerging from Russia again – wars of great powers for the redistribution of the world order,” the expert said.
“Today, two great powers – China with a strong economy and Russia with nuclear weapons, with their ‘little supporters’ – North Korea and Iran – want to change the security structure in Europe. If you look at the draft treaties that Moscow sent to Washington and Brussels in December 2021 before the invasion, you will see that Putin has plans for all the countries that make up the post-Soviet space, which include the three NATO allies. So Putin’s aggressive designs do not end at Ukraine’s western border. They extend further into the rest of Eastern Europe,” said the former US ambassador to Ukraine and Uzbekistan.
“If we don’t stop Putin in Ukraine, it could happen in the Baltic States, which would be much more costly and result in the deaths of American troops.”
John Herbst, Senior Director at the Atlantic Council’s Eurasia Centre. Former US ambassador to Ukraine and Uzbekistan.
Herbst reminded that only $55 billion had been spent on assistance to Ukraine, which is only 6% of the US defence budget. At the same time, the Ukrainian armed forces have destroyed approximately 50% of Moscow’s military potential.
Ukraine “needs a minimum of $3 billion a month, and preferably $5 billion a month, to maintain vital government functions”.
Herbst is convinced that “access to this money, $300 billion of Russian state assets, would facilitate our economic assistance, which the US and the West continue to provide despite the criticism of many politicians at home”.
According to John Herbst, the “Prigozhin mutiny” also showed “the military’s lack of willingness to follow Putin’s orders”. Mr Herbst “believes that the collapse of Russia is an unlikely danger to the world”.
For example, according to the expert, “if Ukraine receives all the necessary weapons and support and achieves great success on the frontline, then Putin’s regime will most likely not last long. During this period, Russia may see some weakening of the central government.”
“However, the idea that the country will split has little historical basis. Those familiar with Russian history know that military defeats have shaken the central government. Still, the country has recovered in one form or another, which is the most likely scenario. Therefore, to say that ‘we must allow Putin to continue his war and war crimes in Ukraine so that Russia does not split’ is political and moral idiocy,” Herbst concluded.