Calls grow to seize Russian assets to help pay for Ukraine’s reconstruction

In this aerial view, a destroyed apartment building is seen next to an area of heavily damaged houses Thursday in Borodianka, Ukraine.Alexey Furman/Getty Images

WASHINGTON — Russian President Vladimir Putin has laid waste to entire cities and sparked the largest refugee crisis in Europe since World War II with his invasion of Ukraine.

Now, Ukrainian officials are leading a growing movement calling on the US and its allies to make Russia pay to repair that staggering damage, by seizing the hundreds of billions of dollars in Russian assets frozen by Western sanctions.

The money — about $300 billion in Russian central bank foreign reserves and tens of billions of dollars more in oligarch wealth around the world — would be used to rebuild devastated Ukrainian cities, offset the economic damage in the country and elsewhere, compensate families for the death of loved ones, and even pay for weapons to defend against the invasion.

“Those monies that were blocked and frozen have to be used to rebuild Ukraine after the war as well as to pay for the losses caused to other nations,” Ukrainian President Volodymyr Zelensky said in a remote address to world finance officials gathered in Washington on Thursday. “If there is starvation started in some regions [of other countries] due to Russia’s war, those frozen assets can be used to pay for the assistance and compensation.”

He is the latest Ukrainian official to call for seizing Russia’s foreign assets, and is joined by other prominent figures such as Wesley Clark, the former NATO supreme allied commander in Europe, Harvard Law professor Laurence H. Tribe, as well as foreign policy and international finance experts. There also is support in Congress, with several bipartisan bills introduced in recent weeks to help accomplish the goal, which could face legal hurdles because US and international law makes it difficult to seize property of nations and individuals. European officials are looking into the idea of using seized assets for reparations, as well.

Reparations are common in the aftermath of wars — think of the large payments allies received from a defeated Germany to help rebuild Europe after both world wars. But no aggressor nation in recent decades has had so much money parked outside its borders, potentially allowing the process of imposing financial restitution for the war even before the conflict ends.

“We’ve never had a set of war criminals previously who were sufficiently careless as to leave a large amount of wealth in the hands of international counterparties,” said Simon Johnson, a professor at the MIT Sloan School of Management and a former International Monetary Fund chief economist. He advocated for the seizure of Russian assets in a recent opinion article written with Oleg Ustenko, economic adviser to Zelensky.

“If you have assets in another country and you attack another country, of course you don’t expect to keep your assets, of course you expect to lose them,” Johnson said in an interview. “That’s like driving your car deliberately into a crowd. Of course you have to pay compensation for that.”

But freezing a nation’s assets is easier than seizing them, experts said, especially in cases where the US is not directly at war with that country. There is no exact precedent to the Ukraine war and the effort could run afoul of US and international laws, putting the assets in limbo for years. This past week, the head of the Russian central bank said the country was preparing lawsuits to regain access to its frozen funds.

Treasury Secretary Janet Yellen was cautious when asked Thursday about seizing the frozen Russian central bank money. She said it’s unclear that US law would allow such a move and the consequences of expanding authority to do so would need to be carefully considered.

“Certainly, looking to Russia one way or another to help provide some of what’s necessary for Ukraine ... is something I think we ought to be pursuing,” she told reporters during this past week’s meetings in Washington of the IMF and World Bank. “I wouldn’t want to do so lightly and it’s something that I think our coalition and partners would need to feel comfortable with and be supportive of.”

As the images of wide-scale destruction in Mariupol and other Ukrainian cities show, rebuilding the nation after the war will be a massive undertaking similar in scope to the Marshall Plan that helped reconstruct Europe after World War II.

Ukrainian Prime Minister Denys Shmyhal told IMF and World Bank leaders on Thursday that the war has forced almost 12 million of the country’s 44 million residents to leave their homes, with 5 million fleeing the country. About 7,000 residential buildings, home to about 220,000 people, have been damaged or destroyed, and total infrastructure losses so far amount to more than $100 billion.

“There are dozens of Ukrainian cities and communities that have been almost completely destroyed by the Russians’ fire. Mariupol is just one example,” Shmyhal said. He estimated his country needs $4 billion to $5 billion a month to keep the nation’s economy afloat while the war is raging and about $600 billion to rebuild once it’s over. Other estimates peg the cost at more than $1 trillion.

A small fraction of that aid has already been pledged. The United States has promised $1 billion in economic aid to help rebuild Ukraine, on top of $3.4 billion in military assistance since last year. The World Bank has mobilized $3 billion, with contributions from the United States, the United Kingdom, and several other nations. The frozen Russian assets could help provide the additional hundreds of billions of dollars Ukraine needs.

Severe economic sanctions put in place by the US and its allies after Russia’s invasion froze about half of the estimated $630 billion in Russian central bank money held outside the country. An estimated $39 billion of that frozen money is in US banks. Sanctioned oligarchs have potentially hundreds of billions of dollars worth of assets outside Russia, including superyachts, mansions, and luxury apartments. An analysis by the BBC linked a dozen sanctioned oligarchs to more than $1 trillion worth of property in the United Kingdom alone.

“Under current sanctions law and practice, the United States and its allies in most cases are able to freeze and block assets but not actually to seize them, and there are good reasons for those safeguards,” said Representative Tom Malinowski, a New Jersey Democrat. “But in this extraordinary situation, I think we need to consider taking an additional step.”

He and Representative Joe Wilson, a South Carolina Republican, are the lead sponsors of the Asset Seizure for Ukraine Reconstruction Act, which would authorize the administration to seize and sell any oligarch asset worth more than $5 million and send the money to Ukraine.

“We’re not going to be giving the yachts and villas and the bank accounts back, and there will be serious questions about the central bank assets that have been frozen,” Malinowski said. “The choice then will be between letting these assets sit there for years doing no good for anybody or finding a way to use Russia’s money to rebuild Ukraine.”

But as the House Foreign Affairs Committee was considering the bill this month, several members reached out to the American Civil Liberties Union legal organization with concerns that it could be unconstitutional. Christopher Anders, the organization’s federal policy director, said the bill as written had problems. “When Congress acts to take assets from anyone, that has to be done with due process,” he said. “In this particular legislation, there were no due process provisions at all.”

So Malinowski and Wilson revised the legislation to give Biden administration officials 60 days to determine if they have the authority to seize and sell frozen assets and request changes to US law if they don’t. Malinowski said administration officials agree with the goal of the legislation and would like to find a way to seize the Russian assets. The committee approved the bill this month and the House could vote on it as early as this coming week.

The legislation demonstrates the complicated legal questions surrounding the effort. Supporters of the effort point to past examples, such as the 2003 seizure of $1.7 billion in Iraqi government money that had been frozen in US banks since the 1990 invasion of Kuwait. But that was allowed because of a provision in a US law triggered by “armed hostilities” between the United States and Iraq at the time. It’s unclear if the United States has the authority under other provisions of the law given that it is not at war with Russia.

Then there is international law. It allows Russian assets to be frozen as a temporary measure until the war ends. When Russia is back in compliance with international law, which prohibits military aggression, the assets must be unfrozen, said Evan Criddle, a professor at William & Mary Law School and an expert on international law. The United States and its allies could choose to ignore international law and seize the property anyway, but they would lose the moral high ground by violating the international rule of law, Criddle said.

“Intuitively our sympathies are on the side of accountability and justice and wanting to provide relief to Ukraine, that’s all for the good,” he said. “We just need to do so in a way that’s consistent with international law.”

Criddle suggested an alternate strategy — use the frozen Russian assets as leverage to get Putin to pay for Ukraine’s reconstruction. Because Russia has an international obligation to compensate Ukraine for the illegal aggression, the United States and its allies could require Putin to agree to pay reparations as a condition of lifting sanctions and releasing some of the assets when the war is over.

Malinowski said he’s open to tying sanction relief after the war to Russia agreeing to contribute to a Ukrainian reconstruction fund. But he noted that Putin could simply refuse. Seizing the Russian assets already frozen by the United States and its allies is a much more certain way to get the money.

“Ukraine is going to need hundreds of billions of dollars to fix the damage that Putin has caused,” Malinowski said, “and it would be fitting and practical to find a way to use some of these assets to at least help in that process.”