How to Maximize Benefits from Russia’s Frozen Assets Abroad

by Eugene Czolij
former president of the Ukrainian World Congress
president of the Ukraine-2050 nongovernmental organization

Sources:

Read the story in German:

Wirtschaftswoche

Read the story in English:

The Kyiv Independent

Read the story in Ukrainian:

UkrInform

Zaxid.net

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Read the story in Spanish

The debates over the political, financial and even legal barriers to using frozen Russian assets to fund the immense reconstruction costs caused by the full-scale invasion of Ukraine rumble on.

It is estimated that the assets of Russia’s Central Bank frozen by Western countries, as part of the sanctions regime, are alone worth €260 billion euros with the financial returns on a portion of those assets held in one central securities depository in 2023 was about €4.4 billion.

There are three possible ways to exploit both the assets and the interest they are accruing:

• Taxing the frozen assets;
• Unfreeze the yearly financial returns on those assets;
• Using those assets as collateral for loans to Ukraine.

Essentially, the aim is to initially avoid unfreezing the assets themselves which, as a result, are not maximizing their benefits in a way that would be most productive for Ukraine and global security.

Is there a better way to maximize the benefits of Russia’s frozen assets abroad?

On 16 March 2022, the International Court of Justice in The Hague rendered an interim judgment in the case of Ukraine vs The Russian Federation, stating that:

“The ‘special military operation’ being conducted by the Russian Federation has resulted in numerous civilian deaths and injuries. It has also caused significant material damage, including the destruction of buildings and infrastructure. Attacks are ongoing and are creating increasingly difficult living conditions for the civilian population”.

On that basis, the International Court of Justice ordered that: “The Russian Federation shall immediately suspend the military operations that it commenced on 24 February 2022 in the territory of Ukraine”.

Since then, Russia has brazenly violated the judgment of the International Court of Justice on a daily basis. Russian forces are relentlessly pursuing their vicious missile, air and artillery attacks on the civilian population and infrastructure of Ukraine and committing acts that many consider genocide, including the forced deportation of children to Russia from the temporarily occupied territories of Ukraine.

Numerous resolutions and calls by the international community for Russia to stop its invasion of Ukraine and to halt its acts of genocide continue to be defiantly ignored by the Kremlin.

The International Criminal Court even issued an arrest warrant against Russia’s President, Vladimir Putin, on 17 March 2023, for “the unlawful deportation and transfer of Ukrainian children from occupied areas of Ukraine to the Russian Federation, contrary to … the Rome Statute”.

Taking everything into account, Russia’s frozen assets should be used first to force it to abide by the March 2022 judgment of the International Court of Justice and the numerous resolutions and calls of the international community for Russia to cease its invasion of Ukraine and comply with the principles of international law enshrined in the United Nations Charter.

Western authorities that have frozen Russia’s assets should now give Russia a reasonable deadline to cease its military invasion of Ukraine, withdraw its military from all territories of Ukraine and return all prisoners of war and children forcibly deported to Russia back to Ukraine. Failure to comply would result in predetermined amounts from these frozen assets being forfeited daily and transferred to Ukraine for each day that Russia defies that deadline.

Such an approach by the international community would fully comply with:

• article 51 of the United Nations Charter, which reaffirms the inherent right of collective self-defence, if an armed attack occurs against a member of the UN;
• the articles on the Responsibility of States for internationally wrongful acts that were commended to governments by Resolution 56/83 of the UN General Assembly, adopted on 12 December 2001, namely:
  • articles 30 and 31, which oblige states to cease any internationally wrongful act and make full reparation for the injury caused by such act;
  • articles 40 and 41, which provide that states shall cooperate to bring to an end any serious breach of an obligation arising under a peremptory norm of general international law, such as the prohibition of aggression.

Following a complete withdrawal by Russia from all of Ukraine’s territories and full compliance with other applicable conditions, any remaining frozen assets should then be summarily adjudicated to ultimately help ensure a just compensation for Ukraine for the huge damage caused by Putin’s war.

This course of action would maximize the benefits of Russia’s frozen assets abroad and provide the greatest positive impact for Ukraine and global security while minimizing push-back. It would also deter other authoritarian regimes with imperialist ambitions from violating the basic principles of international law.