Confiscation of Russian $300 billion sovereign assets: updates and main conclusions
In November, ICUV's team conducted several visits to France, the USA, Canada, and Germany, culminating in a significant high-level conference at the European Parliament in Brussels. Our primary objectives centered around the pressing need to ensure sustainable aid for Ukraine for 2024, clarifying why Ukraine’s survival and victory represent the only viable security guarantees for Europe, and engaging in discussions on medium and long-term perspectives for supporting Ukraine.
At the Brussels conference on November 28, I moderated the discussion on the confiscation of the Russian central bank’s assets and the way they can be used for Ukraine. Nils Behrndt, Deputy Director-General for DG JUST; Vlad Gheorghe, MEP; Andrius Kubilius, MEP; Mark Demesmaeker, Member of the Senate of Belgium; Benjamin Haddad, Member of the National Assembly of France; Kira Rudyk, Member of the Verkhovna Rada of Ukraine; Bill Browder, Head of the Global Magnitsky Justice Campaign and Jacob Kirkegaard, Senior Fellow, GMF took part in the discussion.
Western countries froze the Russian central bank’s assets worth $300 billion in the first days of the full-scale war but ever since further actions with this money stuck. With the ongoing crisis regarding lack of decisions on further American and European assistance packages, now is the time to bring this issue back on the political agenda and discuss how to unlock them. Everyone on the panel agreed on two crucial things that are needed to confiscate Russian assets - legal solution and political will.
During the discussion, the main steps, both legal and political, were determined to receive bigger progress on the issue within the next year than during the previous twenty months.
Talking about legal solutions, the most frequently mentioned obstacle to seizing Russian assets is the concept of sovereign immunity because under international law state assets, in particular that money of the Russian Central Bank, are protected by sovereign immunity. Nevertheless, this principle specifically pertains to confiscation carried out through judicial rulings and does not encompass directives from executive bodies. Vlad Gheorghe, MEP, added "that immunity cannot be absolute. In the real world, you cannot have someone waging war against you and then saying, ok, war is war and money is money, so we will not mix the two, that is simply not how the real world works". It is clear that the primary challenge for confiscation is political, rather than legal. Jacob Kirkegaard stressed that he is "convinced that there is nothing that European Union lawyers cannot make legal if they're told to do it. So the conclave you need to have is not the lawyers, it's the politicians."
Confiscating Russian assets would be a lawful countermeasure according to international law, believes Andrius Kubilius. Following the 2001 UN International Law Commission’s Articles on the Responsibility of States for Internationally Wrongful Acts, the affected state and other states have the right to implement countermeasures against the wrongdoer until it discontinues its unlawful conduct and bears responsibility.
Bill Browder, leading the Global Magnitsky Justice Campaign, contradicted the commonly cited economic argument that confiscation could destabilize Western financial systems: "this argument that somehow, if we were to confiscate those assets nobody would want to own dollars or euros again is complete and utter nonsense. Dollars and Euros are the main reserve currency of the world. The world can't survive without those currencies. And in fact, we're seeing right now when Russia is trying to trade with India to avoid sanctions in rupees. They're basically stuck because it's an unconvertible currency in large amounts, and so that argument shouldn't work at all".
It is important to note that experts of the International Center for Ukrainian Victory prepared an analytical note on the confiscation of Russian sovereign assets, which refutes in detail main arguments of its opponents. This brief is focused on answering why confiscation of Russian RCB assets is legitimate under international law and compelled by political necessity, based on the collective findings of prominent experts displayed in their studies and reports. Among them, there are works of Larry Summers and Robert Zoellick, Laurence Tribe, Philip Zelikow, Yuliya Ziskina, and others.
Kira Rudyk, the Member of the Verkhovna Rada of Ukraine, mentioned that as many precedents as possible are needed. She noted that there is a commitment from Estonia to seek a legal solution concerning the transfer of frozen Russian assets to Ukraine, the aim is also to have Belgium's example duplicated and replicated in other European states. Belgium has created a 1.7 billion euro ($1.8 billion) fund for Ukraine financed by the tax revenue from interest on frozen Russian assets. There would also be a big win if the US and Canada finally have the respective legislation passed.
A clear timeline for decision-making concerning the confiscation was mentioned during the conference. The decision deadline, Gheorghe believes, should be set before the elections to the European parliament in June 2024. As there hasn't been a political decision on this matter yet, addressing it has become a priority on the agenda. While Kubilius is ready to "have a discussion on how to move from what the Commission is now doing to countermeasures and then to have a resolution, and then to put pressure on the Commission".
Deputy Director-General for DG JUST, which is the department responsible for the EU Commission's policies on justice, consumer rights, and gender equality, Nils Behrndt, explained that the Commission is working on a proposal on using the interest generated by the immobilized assets of the Russian Central Bank, having the agreement inside the Union, and then making sure that that money does not just go to the national budget but really goes to the reconstruction of Ukraine. After that, and that is a tougher uphill struggle, to have the political debate on the next step, whether we can tap directly into the capital of the Russian Central Bank with our international partners.
This point of view was supported by Benjamin Haddad, a Member of the National Assembly of France, who thinks the first step is making sure that we can move forward with the plan to immobilize interest. But he added that it’s still a modest step.
Mark Demesmaeker, a Member of the Senate of Belgium, understands that it’s their responsibility to build a political will, and what is more to build the coalitions. Jacob Kirkegaard, Senior Fellow, GMF, adds to this point of view that an international agreement among all the reserve currency holders such as the EU, the US, Japan, and the UK preferably with the Swiss is needed. Benjamin Haddad hopes that France could contribute to pulling together the G7 coalition: "It needs to be a political decision. We need to build political momentum in Paris and Berlin and DC and other G7 capitals and not get stuck too much into the legal level because first I think the political case for it is and you made it earlier. Who is going to pay for the reconstruction of Ukraine?"
The process of confiscation is undoubtedly challenging, but the strategic necessity is apparent. The potential precedent set by the subjugation of a sovereign democratic state by a dictatorship is far more perilous than the precedent established by the confiscation of sovereign assets. Our ability to survive, manage the economy, compensate victims of aggression, defend ourselves, and rebuild should not be contingent on election cycles in partner countries, their citizens' electricity bills, or the global conflict landscape. While prospects appear more promising than six months ago, there is still significant work ahead. Consequently, we persist in advocating the #MakeRussiaPay campaign.
