When the World Bank released its latest damage assessment of war-torn Ukraine this week, it said the cost of restoring and rebuilding had risen to $411 billion. What it didn’t say, however, was who would pay for it.
For Ukraine, the answer seems obvious: confiscate the roughly $300 billion in assets of Russia’s central bank that Western banks have frozen since the invasion last year. As the war continues, the idea has gained supporters.
The European Union has already announced that it intends to use Kremlin funds to pay for reconstruction in Ukraine. At the urging of a handful of Eastern European and Baltic nations, the bloc convened a working group last month to examine the possibility of grabbing that money, as well as frozen assets, from private individuals who have run afoul of European sanctions.
“In principle, one thing is clear: Russia has to pay for the reconstruction of Ukraine,” said Sweden’s Prime Minister Ulf Kristersson, who chairs the Council of the European Union.
At the same time, he noted that putting this principle into practice was difficult. “This has to be done in accordance with EU and international law and there is currently no direct model for doing this,” Mr Kristersson said.
The working group, which has a two-year mandate, is due to meet in Brussels next week.
Other senior officials in the United States and elsewhere sounded more skeptical. After her visit to Kiev last month, Treasury Secretary Janet L. Yellen reiterated her warnings of daunting legal obstacles. The Swiss government declared that confiscating Russian private assets from banks violated the Swiss constitution and international agreements.
The legal debate is just one thread in the tangle of moral, political and economic concerns raised by the possible confiscation of Russia’s reserves.
Ms Yellen and others have argued that the seizure of Russia’s accounts could undermine confidence in the dollar, the most widely used currency for world trade and transactions. Foreign nations may be more reluctant to hold money in US banks or make investments, fearing it could be confiscated. At the same time, experts fear such a move could expose American and European assets held in other countries to greater risk of expropriation in the future if an international dispute ensues.
There are also concerns that confiscation would undermine trust in the system of international law and treaties, which Western governments have advocated most vocally.
But Russia’s devastation of Ukraine’s infrastructure, war crimes indictments against President Vladimir V. Putin, and the difficulty of pressuring Russia economically when demand for its energy and other exports remains high have helped the idea gain traction.
Add to that the uncomfortable realization that the cost of post-war Ukraine reconstruction will far exceed what even wealthy allies like the United States and Europe are willing to pay.
The United States, European Union, Britain and other allies have poured billions of dollars into Ukraine’s war effort, as well as into tanks, missiles, ammunition, drones and other military equipment. And this week the International Monetary Fund approved its largest loan ever – $15.6 billion – just to keep Ukraine’s struggling economy afloat.
But public support for continued funding is not inexhaustible.
“If it is difficult to get funds for infrastructure or housing maintenance now, why will it be easier to get funds later?” asked Tymofiy Mylovanov, the president of the Kyiv School of Economics and a former government minister.
It’s hard enough for Ukraine to get money and equipment “while we’re being killed,” Mr Mylovanov said. “Unless we get killed, we’re going to have trouble getting anything.”
Laurence Tribe, a Harvard University professor of constitutional law, has argued that a 1977 law, the International Emergency Economic Powers Act, gives US presidents the power to seize sovereign Russian assets and reallocate them to Ukraine.
US authorities had previously seized and diverted Iraqi and Iranian assets to compensate victims of violence, settle court cases or provide financial assistance.
Mr. Tribe concedes that calculations about the impact on the dollar or invested assets will ultimately be more important to policymakers than the legal ones. But he finds these broader policy concerns unconvincing.
“It’s crazy to argue that having assets seized is more destabilizing than aggressive wars,” Mr. Tribe said in an interview on Friday. “The survival of the world economy is far more threatened by Russia’s behavior” than by financial retaliation.
And he added that taking billions of dollars either as a deterrent or as punishment makes far more sense than filing war crimes charges.
Other prominent voices in the United States have endorsed the term. Lawrence H. Summers, a former Secretary of the Treasury; Robert B. Zoellick, former President of the World Bank and US Trade Representative; and Philip D. Zelikow, a historian at the University of Virginia and a former State Department adviser, made their point in an opinion piece in the Washington Post this week.
“The transfer of frozen Russian reserves would be morally right, strategically wise and politically sensible,” they wrote.
In addition to Ukraine, some countries have taken steps to steal foreign assets owned by Russian individuals and corporations and use the money for reconstruction. In December, the Canadian government began seizing $26 million belonging to Russian oligarch Roman Abramovich after it passed legislation making it easier to confiscate private Russian assets from those under sanctions.
A federal judge in Manhattan last month gave the green light to seize $5.4 million from another Russian businessman facing sanctions, Konstantin Malofeev. Estonia is also aiming to pass laws that would give similar powers to the local government.
But Mr. Tribe, Mr. Summers and others argue that the focus should not be on confiscating private assets, which would be legally much more complicated and time-consuming, but on the hundreds of billions held by the Central Bank of Russia.
Wherever the money comes from, the bill keeps growing. Last year, the Ukrainian economy shrank by a third. The war has plunged more than seven million people into poverty, the World Bank reported, and reversed 15 years of development progress.