The following opinion piece by Olena Halushka, Member of the Board of the Anti-Corruption Centre, co-founder of the International Centre for Ukrainian Victory, first appeared on Ukrainska Pravda on March 13th, 2024.
Ahead of the second anniversary of the full-scale invasion globally, numerous demonstrations in support of Ukraine have taken place.
About 30 of them prioritised a clear demand: #MakeRussiaPay. This concerns the $300 billion worth of assets of the Russian Central Bank, which were frozen in the early days of the full-scale invasion in key Western states-partners of Ukraine.
People took to the streets of cities with banners indicating the losses inflicted by Russia on our economy and infrastructure over the past two years. According to World Bank data, this amount reached $486 billion.
Together with our colleagues from the International Center for Ukrainian Victory (ICUV), who were co-organizers of these actions, we participated in demonstrations in Munich and Brussels.
Additionally, over the past six months, we, in coordination with the Ministry of Justice team, together with Hanna Hopko, communicated with deputies, politicians, and journalists, visiting Munich, Berlin, The Hague, Brussels, London, Oslo, Rome, only in the last two months.
Conferences in the Senate of Italy in January, discussions at the large-scale event Cafe Kyiv in Berlin, and hearings in the EU Affairs Committee of the German Bundestag in February, as well as other smaller-scale events that we initiated, were dedicated to the topic of confiscation.
The results of this joint pressure are slowly yielding results. More and more Western high-ranking officials are publicly expressing support for confiscation.
Rishi Sunak, the Prime Minister of the United Kingdom, urged Western countries to be “bolder” in the matter of confiscation of Russian assets; the US Treasury Secretary supported the confiscation of $300 billion worth of Russian sovereign assets and their use for Ukraine.
Statements in support of confiscation for the benefit of Ukraine were also heard from Canada and Poland, and even from the Swiss parliament.
In addition, resolutions politically supporting confiscation were passed in the parliaments of Italy in January and Germany in February.
However, within the Group of Seven (G7), which since December of last year has become the main platform for discussing confiscation, opinions are still divided into two groups: supporters of full confiscation include the US, Canada, and the UK, while European members are more skeptical, seeking to focus on transferring only the proceeds from frozen assets to Ukraine.
The most frequent concerns we hear from partners are the threat to the stability of Western financial systems and fear of Russian retaliation against companies remaining in the Russian market.
We continue to explain why these fears are exaggerated. Partners also discuss various interim alternatives. For example, issuing military bonds or loans backed by future reparations payments from Russia.
But it is critically important for such instruments to 1) allow spending money on Ukraine’s defence needs, not just on reconstruction and economic support, and 2) from the outset, include necessary safeguards against potential debt burden shifting onto Ukraine in the future if reparations are not paid for various reasons.
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As the majority of frozen assets of the Russian Central Bank are located in Europe, particularly €191 billion in the Belgian depository Euroclear, our main advocacy efforts are directed there.
Euroclear HQ, Brussels: Door EmDee – Eigen werk, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=61247775
In all closed meetings and public discussions, in conversations with journalists regarding confiscation, we emphasise the urgency of this decision.
Furthermore, we explain the need to consider confiscation not in isolation but in a broader context, insisting that European partners should work on a “Plan B” for long-term systemic support for Ukraine in case American aid is reduced or disappears.
One of the sources of financing Ukraine’s defence in the Plan B could be frozen Russian assets.
The potential impact of Russia’s victory in Ukraine on international law and the stability of Western financial systems is disproportionate to the risks of confiscation and significantly outweighs these risks.
Currently, European lawyers unanimously agree that the proceeds from frozen Russian assets do not belong to Russia. In February, the European Council adopted an interim decision that from 2024, these proceeds will be segregated separately from other asset management revenues.
By June 2024, the European Union is expected to finalise the decision on their allocation to Ukraine. This amounts to approximately €4 billion annually, starting from 2024.
It is important that these funds are transferred to Ukraine in full and without delay, with the possibility of spending them on Ukraine’s defence needs, as well as beyond the previously allocated €50 billion by the European Union under the Ukraine Facility program.
Speaking in the European Parliament, President of the European Commission Ursula von der Leyen proposed using the proceeds from frozen Russian assets for “the purchase of military equipment for Ukraine,” which is a positive sign.
But what about the revenues already received for 2022-2023? According to the Belgian government, the interim decision in February regarding the revenues from Russian assets will not be reversed.
Thus, the €5.2 billion that Euroclear, a Belgian company, earned on Russian assets in 2022-2023, will remain there in a reserve fund for future risks.
The Belgians do not explain what these risks are and why so much money is needed. Obviously, some reserve for Euroclear is necessary, but why exactly this amount?
In her interview with the Belgian media, the Executive Director of Euroclear stated that as of the first three quarters of 2023, the company had €34 million in additional expenses and lost profits associated with frozen Russian assets and expects this amount to increase.
One of the possible risks she mentions is lawsuits from Russia in courts outside its territory. However, there is no rule of law in the aggressor country, so spending any money on defending cases that will result in pro-Kremlin decisions makes no sense.
Furthermore, no competent court in a democratic country will recognize and enforce such decisions of Russian courts.
€5.2 billion is a huge amount that Ukraine critically needs right now. And unlike future revenues for 2024, it is already generated. For comparison, the IMF’s annual funding program for Ukraine in 2023 amounted to $5.4 billion.
As the security of not only Ukraine but the whole of Europe is at stake, and Ukraine faces a critical problem with financing defence and maintaining macroeconomic stability, the cost of not using this money for Ukraine’s needs is incomparably high.
Currently, Ukraine has perhaps the lowest level of military assistance from partners since the beginning of the full-scale invasion.
Ensuring that a larger portion of these funds is directed towards Ukraine’s defence will be one of our advocacy tasks in the coming months.
Russia must pay for all the crimes of this war.
This is a difficult but achievable task.
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Read also – Ursula von der Leyen: EU Considers Redirecting Frozen Russian Funds for Defence
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