The West dallies about funding Ukraine’s war effort, but can do so by confiscating all the Russian financial assets it has frozen. More than $300 billion in Russian financial assets were immobilized after the 2022 invasion, with $200 billion on deposit at settlement bank giant, Euroclear, in Brussels. Western countries debate about the legalities of outright confiscation of these funds, but this fall Belgium became the first country to devise a workaround to begin to tap into these billions. On October 11, Belgian Prime Minister Alexander De Croo said a 25 per cent tax had been levied on the windfall profits made on these assets as a result of high interest rates. This would amount to €2.4 billion in 2023 and 2024 and be sent to Ukraine. Two weeks later, the European Commission said it would do the same. Then on December 12 it reneged because the European Central Bank warned that if securities were confiscated, unless a crime had been committed, the Euro’s reputation as a safe currency would be damaged. But the unprovoked invasion and destruction of Ukraine was a crime and, besides that, Moscow gleefully confiscates the assets of foreign companies who have decided to leave Russia. Seizing Russia’s wealth is not about the law. It is about justice and moral courage.
The refusal by the West to make Moscow pay accelerates the destruction of the rules-based world order. After dropping the windfall profits gambit, the European Commission announced the frozen assets would be segregated inside the European Union along with any profits. These would be withheld from Russia. A spokesman told Euronews that seizing Russian state profits as reparations for Ukraine remains a “long-term” objective but there’s “no deadline and no fixed condition” for doing so.
There’s a ton of Russian money offshore. In the years before launching its full-scale invasion of Ukraine, Moscow amassed $600 billion in foreign currency earnings from selling oil and gas to the West. This “war chest” was intended to give the Kremlin a financial backstop against the West to cushion the cost of future economic sanctions. It was stashed in gold or in Western Europe’s banking system because the Ruble was unstable and also because Russia’s own banks are controlled by crooks. Now as Russia destroys Ukraine’s cities and infrastructure those assets must be obtained to help pay for Ukraine’s defense and rebuild, estimated to total $411 billion already, according to World Bank figures. Instead, Europe wimps out. So has Japan, Canada, and America where similar legal tangles obstruct legislative initiatives to grab Russian cash.
But this is war and laws don’t protect the enemy. It’s irrational to argue that Russian state assets should be protected by sovereign immunity under international law when it has ignored Ukraine’s. Likewise, concerns that grabbing Russia’s billions may set a precedent that will encourage others to do the same ignores the fact that the Kremlin already loots Ukraine and foreign firms in Russia that have decided to exit. In fact, Putin’s plundering has solidified his control and he distributes the financial and real assets of major European and American corporations as booty to his favorite oligarchs.
Sequestering assets rather than outright seizure is another mistake based on the false assumption that compensation will be made once the war is over. It will not. Furthermore, Ukraine needs the funds now, especially given the vagaries of those in charge of the public purses in European and American democracies. The only reasonable assumption to make is that Russia will – whether it wins, loses or draws -- never ever pay anything at all for its predations to Ukraine. And it cannot be forced to do so which is why confiscation must take place now as pre-emptive war reparations. And Russia’s income from its lucrative and illicit energy export trade must be seized too. Despite price caps and sanctions, Russia is earning $750 million per day delivering fossil fuels by sea, land, and pipeline.
American investor Bill Browder has been crusading for years to avenge the murder of his Russian lawyer, Sergei Magnitsky at the hands of Kremlin police. His Magnitsky Act is enacted on dozens of countries and sanctions human rights offenders or corrupt individuals then freezes and seizes their assets. Regarding Ukraine, he said in an interview: “Russia has invaded the sovereignty of Ukraine and caused enormous damage by committing an act of aggression, for which they're liable. A court would adjudicate which law should prevail, the law of sovereignty or the law of sovereign immunity,” he said. With its invasion, Russia has forfeited any right to sovereign immunity.
To combat this, Russia lobbies and threatens retaliation to prevent asset seizures. Russian State Duma Speaker Vyacheslav Volodin said “our country has moral and legal grounds for actions [seizures] regarding the [Russian-based] assets of the G7 countries, which are greater than the frozen Russian funds.” Browder’s response is to ignore the threats. “We shouldn't spend any time worrying about Western assets being frozen or seized in Russia, because they'll all be seized, so it doesn't matter what we do. And, by the way, those companies that are still in Russia shouldn't be in Russia anyway. And both in the West and in the East, Russians continue to sell their oil and gas and collect the money to kill Ukrainians. Sanctions must be tougher.”
Russian oil tankers should be banned from all Western ports, he proposed. “That would have a truly profound effect on Putin's ability to conduct this war. Without the revenue from oil and gas, Russia has no ability to borrow in the financial markets. They have no savings because their central bank reserves have been frozen,” said Browder.
Unfortunately, the refusal by the West to tax or grab assets eliminates an immediate source of help for Ukrainians. Belgium’s De Croo was cut off at the knees by the rest of Europe after he devised, then announced, his tax workaround that would have provided billions to Ukraine. Treating Russia with kid gloves does not work. Putin intends to conquer Ukraine and portions of Europe and yet Europeans respond, and threaten their own survival, by deploying Marquess of Queensberry Rules in a slugfest to the finish with the most dangerous leader in history. This is ruinous.
Excellent piece, Diane. What surprises me is Pres. Biden's failure to tap into the U.S.-held portion of these assets, which (based on some news reports) appears to be $30-35 billion. One of the nation's most highly regarded constitutional law professors, Harvard Professor Laurence Tribe, and a group of legal experts have studied the issue in-depth and concluded that the president, by simply issuing an executive order, can transfer the funds immediately. The legal authority is fully in place and has already been exercised by George W. Bush when he freed up frozen Iranian assets for payment of private claims against the Iranian government.
The intensity and glee that some of the Trump cultist congressmen (e.g. .Gaetz and Greene), a presidential contender (Vivek Ramswampy), and media celebrity (Tucker Carlson) have demonstrated in their efforts to prevent any aid to Ukraine ("not even a penny") has made me think that the issue has become more than merely "political" and has grown into a personal obsession for them. It would be interesting to see what objections they would interpose if the U.S. taxpayer is spared the burden of providing any aid by sending Ukraine russian assets.
What is the rest of the world waiting for?
Pull the tooth before the infection kills you, because it can and will!