| 5:03:39 PM - Tue, May 31st 2022 |
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Using seized Russian assets to rebuild Ukraine won't be easy
When Volodymyr Zelenskyy addressed the World Economic Forum (WEF) via video link on May 23, he issued a heartfelt appeal to the West: Use the assets seized from the Russian central bank and the country’s oligarchs to fund the estimated US$500 billion cost of rebuilding Ukraine.
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“If the aggressor loses everything, then it deprives him of his motivation to start a war,” he said. “Values must matter when global markets are being destabilised.”
Many Western leaders seem to agree. Josep Borrell, the EU’s chief negotiator recently suggested there is “logic” in using Russian foreign exchange reserves to rebuild Ukraine. And Ursula von der Leyen, the European Commission president, responded to Zelenskyy’s appeal in Davos by noting that Russia “should also make its contribution” to reconstruction.
This makes for rousing political rhetoric. However, the dirty secret at this week’s WEF meeting is that these public appeals are causing private angst for many of the Davos corporate and financial elite, from the West and its allies.
NO DUE PROCESS IN PLACE
This is not because of a lack of sympathy for Ukraine’s plight, nor a failure to recognise that the post-war reconstruction bill will be vast. Instead, the issue is the lack of due process. While most think there is an overwhelming moral case to help Ukraine – and punish Russia’s aggression – freezing assets is quite a different matter from disbursing them.
If either is done without a consistent and transparent framework, Western governments will either face years of costly lawsuits or end up smashing apart the trust that underpins their political economies. As Zelenskyy himself noted, “values” matter now, more than ever – particularly when markets are destabilised.
IDEAS TO USE FROZEN ASSETS
So, how should this be resolved? Leaders are scrambling for solutions. Von der Leyen told the WEF this week that “our lawyers are working intensively on finding possible ways of using frozen assets”. Separately, Western lawyers sympathetic to Ukraine are studying existing legislative tools to see whether they can be repurposed to this end.
One idea floating around is to use America’s extensive civil tort laws to enable Ukraine to claim “damages” from the oligarchs’ US assets. A variant of this might be attempted by plaintiffs in France and the Netherlands too, I am told.
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