On Thursday, at their summit in Brussels, EU leaders agreed in principle to commandeer most of the profits being generated from frozen Russian state assets to use in support of Ukraine.
This news follows last weekend’s Lib Dem Spring conference’s endorsement of an amendment to the “Liberal Values in A Dangerous World” motion, calling for legal ways to be found to access the estimated US$ 300 billion of the Russian state’s frozen sovereign assets – about half the total being held in the world – as reparations for Ukraine. The World Bank estimates that US$ 480 billion’s worth of damage has been done to Ukraine so far in Russia’s war of aggression.
EU leaders’ initial steps involve leaving the principal untouched for now and concentrating on accessing the profits being generated by the frozen state assets. The aim is to generate €3 billion this year, with the first tranche of €1 billion released to Ukraine by July. European Commission President von der Leyen wants to use it primarily to assist Ukraine’s defence of its country.
This perhaps rather hesitant start to the use of Russian state assets is part of ongoing efforts to find ways to access the funds in legal ways which also do not run high risks to the stability of the euro and have impact on the financial system. Most of the money is held in Belgium by Euroclear, the central securities depository, which will clearly need to be protected from Russian retaliation.
As European governments are struggling to support Ukraine financially, there is no realistic possibility of rebuilding Ukraine without using frozen Russian assets. The principle is clear to everyone: the aggressor must pay.
Last month, the European Parliament passed a resolution which underlined the urgency for finding legal ways to confiscate Russian assets for the reconstruction of Ukraine and compensate war victims. Similarly, earlier this month, the Swiss Parliament authorised its government to work on creating a reparations mechanism based on international law to be used in cases when a country is illegally attacked. Switzerland holds almost US$ 9 billion of Russian state assets.
A senior EU official has been quoted as saying that Russian state deposits held in Europe could generate between €15 billion and €20 billion in post-tax profits between now and the end of 2027, depending on global interest rates.
The West has already indicated that it will not return Russia’s assets unless reparations are paid.
The Lib Dems used to have a somewhat pacifist reputation many years ago but – in a dangerous world with liberal values and democracy increasingly under threat – defence and security issues are rising up the agenda. Calls at the Lib Dem Spring Conference for European industry to ramp up the manufacture of weapons ‘to meet the threat triggered by Russia put her economy on a war footing’ further ratcheted up the pressure. The Lib Dems’ robust stance on many international issues, not least the Israel-Hamas war, is earning it a lot of plaudits. The rising profile of the party’s internationalist grassroots expertise and activism may well begin to pay unexpected dividends amongst the electorate in the upcoming UK General Election.
* George Cunningham is an elected member of the Federal International Relations Committee and on the executives of Lib Dems Friend of the Armed Forces and Liberal International British Group. Email: [email protected] Social media: @gfcunningham.bsky.social Twitter/X: @GFCunningham
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18 Comments
The idea of seizing Russian sovereign assets, whether dressed up in a cloak of ‘legality’ or not, is hugely problematic. Firstly, it will inevitably lead to Russia seizing assets in retaliation. Secondly, it may give a massive jolt to the world economic system by fundamentally undermining trust. If those concerns are not sufficient, suppose Russia decides to escalate and arrests/detains foreign diplomats in Russia in breech of international treaties (even if they dress it in a cloak of legality) after first recalling their diplomats from unfriendly countries. Indeed, seizing sovereign assets count be viewed as an act of war. These are incredibly worrying times.
Should the same principle and practices apply for the state of Libya following the damage and harm wrought on Libya by the “West”?
Israel?
All armed conflicts?
In which ways does “commandeering profits” differ from embezzlement?
@Steve Trevethan 6.45pm: This article is about using Russian assets to compensate Ukraine for at least some of the damage done by Putin’s invasion. His question really doesn’t deserve an answer. I suggest he looks up ’embezzlement’ in a dictionary as he clearly doesn’t know what the word means!
The whatabouttery thrown about these comments is as irrelevant as it is disrespectful to the struggle of brave Ukrainians.
The assets should be used for arming Ukraine. It is too early to consider rebuilding when Russian Missiles are still landing on the country and it’s people.
@Mary: “Firstly, it will inevitably lead to Russia seizing assets in retaliation.”
Perhaps, you have woken up from a long nap that began in early Feb 2022.
Were you not aware that Russia has already seized large amounts of Ukrainian assets? Did you not know that they occupy tens of thousands of square miles of Ukrainian land?
“These are incredibly worrying times.” Indeed. That’s why all democrats should be standing against Russian aggression, not apologising for it.
@Chris ….Mary was addressing the issue of reciprocal action by the Russian state, which also holds significant western assets . As it’s been shown already that a decree signed by Putin is all it would take. That’s what you get when you embrace globalization. All it takes is a stroke of a pen , to make all those commercial legal obligations meaningless..
We are only too aware of the conflict in Eastern Ukraine – it’s been going on since 2014. It’s a quagmire – with Ukrainian army holding it’s position at huge cost as its soon to enter the twelfth month of it’s spring offensive.
@Chris
I don’t think anyone is suggesting that Russia has not illegally stolen Ukrainian sovereign assets by annexing Ukrainian territory. And the collective West has rightly condemned Russia for it. The question is now whether the collective West will continue to stand as upholders of international law or itself illegally steal Sovereign assets from Russia. To argue that ‘we can break international law because Russia did’ is not a good argument.
@Martin @Mary Russia has already been confiscating Western assets for some time now – be it enforced ‘sale’ at undervalue or nationalisation of private sector businesses. There’s really not a lot left to lose that hasn’t already been appropriated in one form or another.
@Dominic…They’ve ( Russia) has frozen financial assets as a reciprocal action already – it runs into billions of pounds from various western countries. If the west is proposing to seize those Russian assets held overseas it sets a dangerous legal precedent , & no doubt will be followed by the loss of those funds frozen by the Russian state ..The effects of such actions – as Mary has pointed out could be significant…
All governments can be said to seize private assets when its suits them to do so. The imposition of taxation is exactly that. Joe Bourke’s highly spruiked Land Value Tax is only different from compulsory nationalisation of land without compensation by degree. If the tax were high enough, no-one would want to own it in any case. Giving it away to Govt would be the least expensive option.
Sometimes the question transcends the financial when National security is involved. The British and French weren’t so much complaining that Egypt hadn’t paid adequate compensation when Nasser nationalised the Suez canal in 1956 that he’d had the audacity to Nationalise it all. A short war followed.
I doubt if international law can be used by either side. If anyone is squeamish about the word ‘confiscation’ then just replace it by ‘tax’.
Gosh, the West proposes to confiscate 1bn dollars worth of Russian assets.
I’m really concerned about the sky falling down now after this retrograde Western action. Those poor Russians. If anyone doesn’t deserve, it’s them.
@Martin Gray – Russia has stolen, not frozen, the assets of foreign companies. They have over a billion in foreign civilian aircraft alone that they have stolen and are flying around every day. That’s not freezing an asset by any stretch of the imagination.
@Paul…It’s a question of international law , if you’re in favour of it or not – irrespective of what the Russian state has already done , & will no doubt act accordingly if their sovereign assets are seized..
https://www.globaltimes.cn/page/202402/1306682.shtml
@ Martin,
“International law” often isn’t enforceable at the best of times. During a near state of war, as we are in now, isn’t that.
Our priority should be to ensure that we stop the escalation which will lead to a nuclear disaster for both sides if we fail.
The destruction of the Nord Stream gas pipeline was almost certainly an act of war by the Americans. It wasn’t a smart move as the Russians were putting any gas through it in any case. They didn’t need to blow it up. Neither did Germany. The only motivation I can see was to stop the Germans breaking ranks and start paying for Russian gas again to solve the economic problems. There must have been other ways of doing that.
@Peter ….I don’t sense that near state of war Peter – the conflict in Eastern Ukraine has been going on for ten years , the vast majority of voters couldn’t give a fig about the integrity of Ukraine’s borders ..The post was in regards to international financial implications in the event of the seizure of a foreign countries financial assets….The only escalation that’s been banded around is by Macron – if people are so fond of war Ukraine has welcomed foreign volunteers in that conflict ..Our territorial borders are not under threat & haven’t been for over 70 years …
Martin Gray says….. ‘Our territorial borders are not under threat & haven’t been for over 70 years’. It should behove this ‘I’m all right Jack’ version of Neville Chamberlain to remember 1939! The Ukrainians are heroically defending their homeland and only ask that the west supply the arms to ensure that ‘Adolf’ Putin get’s the necessary ‘bloody nose!
“The West has already indicated that it will not return Russia’s assets unless reparations are paid.”
Those who advocate this line might want to read Keynes on the effect of the imposition of reparations on Germany in the post WW1 period. It led to a sense of grievance and betrayal – and the rise of you know who.
Reparations aren’t be paid by those who are responsible for starting wars. They probably aren’t paid at all. They create far more problems than they solve.
@Leekliberal
There is no doubt that the Ukrainians have fought with amazing courage against a much stronger foe. Sadly, however, once Ukraine was supplied with all the equipment it said it required for a counter-offensive in 2023, the reality on the ground became one of huge losses for relatively minor gains. Most analysts appear to be coming to the conclusion that it is going to be impossible for Ukraine to push Russian forces back to the pre-2014 border unless NATO forces become directly involved in the war. Personally I don’t want NATO embarking on World War 3 for a non-NATO member