With the costs of Vladimir Putin’s invasion of Ukraine already exceeding $500 billion, some Western governments are pushing to use frozen Russian assets to pay for an eventual reconstruction. The moral case for holding Putin accountable is clear. Unilaterally diverting Russian assets to Ukraine at this stage, however, would create more problems than it would solve.
About $300 billion in Russian central bank assets have been frozen by Western governments since the start of the war, in addition to tens of billions in yachts, mansions and other property belonging to oligarchs and officials linked to the Kremlin. Advocates say that repurposing those assets is justified under the principle of “aggressor pays” — which is meant to punish states that try to redraw borders by force — and that funds should be released to Ukraine immediately, even with the war raging. Rebuilding the country’s bombed-out infrastructure would help stabilize Ukraine’s economy, encourage refugees to return, and boost public morale.
Yet an outright seizure of Russia’s assets would be politically fraught. It would be contested by countries such as Brazil, China and India, none of which supported a United Nations resolution last November calling for Russia to pay reparations. It would also set a worrying legal precedent. There are few established rules for confiscating frozen state assets, for good reason: Respect for state and private property is essential to modern economies and a functioning global trading system. By confiscating Russian assets, the US and Europe would risk undermining that hard-won norm, while giving other governments an incentive to take punitive action against Western interests.
In the past, the US has acted to seize some state assets belonging to Afghanistan, Iran and Iraq. But Russia’s frozen reserves are far larger and more dispersed. Confiscating them would require a degree of international consensus and coordination that doesn’t yet exist. The idea is supported by EU members such as Poland and the Baltic states, but few governments have implemented laws permitting significant forfeitures.
The West has other options in the meantime. Clearing houses reinvest income from frozen assets, generating interest worth several billion euros a year. The EU is right to investigate ways to deny Russia access to those gains and apply them toward rebuilding Ukraine. Similarly, firms with Russian holdings could be made to transfer the profits made from investing them for the purposes of compensation.
Western countries should also make explicit (as the UK is seeking to do) that Russian assets will remain frozen until Moscow agrees to pay reparations. That linkage reinforces the principle of state responsibility and holds the assets as a bargaining chip in any future negotiations to end the war.
Meanwhile, the West should work with Ukraine to set up an international claims commission, similar to those used in hundreds of past conflicts. This should include a process for adjudicating requests for compensation, including private claims. Western governments should conduct a transparent accounting of all Russian assets currently in abeyance. Ukraine needs to do its part by pressing ahead with judicial reforms, which are crucial to reducing corruption and bolstering confidence that reconstruction funds will be properly spent.
The desire to make Russia pay for its aggression is understandable, but Western leaders must be mindful of political realities and the rule of law. The best way to hold Putin accountable is to adhere to the principles of due process and respect for property that Russia has sought to destroy.
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The Editors are members of the Bloomberg Opinion editorial board.
