The Case Against the Tempting Case to Seize Russian Assets
Even a completely victorious Ukraine will need leverage to secure a durable peace
With winter approaching and Ukraine’s battle lines little changed, Western governments confront a fresh round of questions about how long they can keep sending billions of dollars a month to a cause that appears stuck. Looming U.S. elections will put even more pressure on the Biden Administration and its international allies to seize the Russian government assets they have frozen in order to pay Kyiv’s bills.
The moral arguments are unquestionable. The legal arguments are mixed, but talented lawyers are finding creative paths to justify taking the money. Sadly, none of these considerations outweigh the key diplomatic and economic considerations that will emerge when the war ends. Seizure is a seductive mistake.
An important distinction is that this debate centers on Russian government money held in international banks, rather than the luxury assets of Russian oligarchs. As good as it feels to seize yachts and luxury villas, they are often tied up in lengthy court proceedings while requiring taxpayers to pay the upkeep. Meanwhile, connecting what appear to be ill-gotten gains to the war itself is rarely easy.
The real prize is the estimated $300 billion of Russian government money now frozen in international banks, mainly in Europe. That would put a real dent in the mounting costs to rebuild Ukraine, which the World Bank estimated this spring may cost some $411 billion, more than twice the country’s pre-war GDP.
Rarely does political expedience and moral clarity align so clearly as it does here. The case against Russia’s crimes don’t even have the makings of a decent murder mystery. Vladimir Putin ordered an unprovoked attack on a neighboring country on television. As a world audience continues to watch in horror, his government continues to occupy foreign territory, kill civilians and destroy property.
Kyiv and its allies likely won’t occupy any Russian territory and will still need to secure a peace that includes security guarantees, minimal economic understanding and, to be sure, significant reparations.
Totting up international assistance to Ukraine so far is a moving target, but comprehensive estimates count commitments $140 billon from Europe, $73 billion from the United States and another $38 billion from others. Voters in these countries have naturally thought about how long they should have to pay for the crimes of a country that got $17 billion in oil revenue last month. It takes a political leader of extraordinary patience to not press for seizure.
But even the most emotional politician likes to rely on a legal justification and here the question becomes more complex, centering largely around two time-tested principles.
International investment law essentially forbids governments from taking property without compensation, and the United States has historically gone to great lengths to shore up this norm. Russia’s recent decision to take assets of companies from “unfriendly countries” looks patently illegal, but probably not automatically an excuse for retaliatory seizures.
A second potential justification centers on “countermeasures,” which international law generally recognizes as permissible if they help to force states to end illegal behavior. Generally, however, these countermeasures must be reversible when peace is restored.
Some prominent former American officials have called for applying these principles according to a “wartime paradigm.” Debating strict legal precedent, in their view, is akin to letting the “patient die while doctors deliberate.” The arguments are even more persuasive when you can dismiss concerns about sovereign immunity or due process since these are state claims against another state.
There are legitimate concerns that seizures might further undermine the international status of dollars and euros, perhaps encouraging the Chinese or Saudi governments to seek alternatives with less risk of sanction or seizure. But the fact remains that there just aren’t any and there won’t be for some time.
Even if clever legal scholars find a path to seizure, however, the United States and its allies should resist what seems like an easy answer. The cold reality remains that this conflict will almost certainly end in a negotiation rather than unconditional surrender. And negotiation requires leverage.
Consider even the extreme case of a military victory that includes Ukraine recovering all its territory and triggering the overthrow of the Putin regime. Kyiv and its allies likely won’t occupy any Russian territory and will still need to secure a peace that includes security guarantees, minimal economic understanding and, to be sure, significant reparations.
Talks with even a cooperative new Russian leader will have to include an end to Western financial sanctions, the resumption of global energy sales and the release of Russia’s financial assets. If Ukraine’s allies have already taken this money – and likely spent on current needs – a durable settlement will be much harder to achieve. In any of the much more likely scenarios, every ounce of leverage will prove crucial.
As the brutal fighting continues, the temptation to seize the frozen assets looks irresistible. But when the fighting ends, which it will eventually, we’ll be sorry we gave in.