The idea of using frozen Russian assets to finance reconstruction in Ukraine is logical and certain poetic. Russian troops have caused tens of billions of dollars in damage in unprovoked attacks on neighboring countries and committed atrocities against Ukrainians. The moral case for ensuring “aggressor pays” is strong. To maintain the moral high ground, however, pro-Ukrainian democracies must follow due process and the rule of law.
There are several complications. Freezing assets – depriving the owner of access – is different in law and practice from confiscation and redistribution of assets. Under international law, assets of convicted war criminals can be confiscated to compensate victims. Although Moscow has ignored an interim order by the International Court of Justice to suspend its military operations, there have been no such verdicts against senior Russian officials. Moreover, while Western allies have fully supported Ukraine, they themselves are not at war with Russia.
Two avenues are being explored: confiscation of the already frozen accounts, yachts and mansions of Putin-linked oligarchs, and seizure of state property — most importantly, the frozen $300 billion in reserves held abroad by Russia’s central bank. Canada has become the first G7 country to advance legislation authorizing it to reallocate frozen Russian assets to compensate war victims. As part of the latest U.S. $40 billion aid package for Ukraine, President Joe Biden has asked Congress to authorize the seizure of the assets of sanctioned Russian tycoons.
In the EU, a “freeze and seize” working group is working on a similar approach. But some EU countries, notably Germany, have legal or constitutional restrictions on confiscation of assets, especially without criminalizing the owner. Brussels is working to make evasion of sanctions — for example, the transfer of assets to other jurisdictions — a criminal offense that could pave the way for confiscation. But some Russian tycoons have launched potentially lengthy lawsuits over the sanctions imposed on them, demanding that the government prove they have genuine ties to the Kremlin.
The moral justification for confiscation of public assets such as central bank reserves may be clearer, and these represent more lucrative goals. The U.S. has seized Iranian and Afghan assets in the past, but in part to fund damages to U.S. victims of terrorist attacks. Although a 1977 law authorizes the president to freeze foreign assets, he can only confiscate and redistribute those assets if the U.S. is “engaged in hostilities or attacked by a concerned country.”
A Biden administration could ask Congress to legislate the expropriation of Russian sovereign assets. This needs to be carefully crafted to withstand future judicial scrutiny, including constitutionality.
However, the risk of legal setbacks and reversals is not a reason for the government not to try to use Russia’s overseas “treasures” to compensate Ukraine. Checks and balances are an integral part of democracy under the rule of law. It is important to be seen as abiding by legal norms, even when responding to extraordinary events, in order to maintain the trust of global, private and sovereign investors in the Western financial system.
After all, in the face of Moscow’s aggression, the United States and its allies and Ukraine itself are fighting to defend the rules-based global system that underpins peace and security. That should include holding Putin’s Kremlin legally and financially responsible for the human and economic toll of its war — but not at the expense of the values the West claims to uphold.