Published on June 14, 2024, 1:24 am

In an unprecedented move, leaders of the G7 have agreed to use about $50 billion of frozen Russian assets as collateral for a $50 billion loan for Ukraine’s reconstruction. This decision was driven by the United States’ persistent efforts in securing valuable resources for Ukraine during Russia’s ongoing brutality upon the country. Simultaneously, Russia continues its attempts to destroy Ukraine’s economy and energy grid.

The United Nations General Assembly approved this approach of using frozen Russian assets for war reparations with a 94-14 vote, holding Russia accountable for the war. This verdict gives the US sufficient legal standing to implement an international form of civil forfeiture, seizing state assets and property of sanctioned Russian oligarchs. Additionally, the G7 has incorporated reparations into its policies, mainly targeting Russian national assets such as central bank deposits.

This G7 action is one among four proposed plans aiming at asset confiscation that are nearing their final stages. The European Union’s (EU) plan proposes focusing on interest earned from $210 billion worth of frozen Russian central bank deposits held primarily at Euroclear settlement house in Belgium across EU member states. Approximately 90% would support Ukraine’s military effort against Russian invasion like financing arms purchases and ammunition supplies which may be extended into training programs. The remaining 10% would help rebuild and sustain Ukraine’s war-wrecked economy possibly through budgetary or humanitarian aid support upon ending the war.

However, EU’s plan covers only funds generated post February 15, 2024, while funds available before this date will remain in escrow with Euroclear. Certain issues persist with nations like Slovakia, Hungary along with Ireland and Malta that are constitutionally preventing armament purchases either due to reluctant decision-making or legal provisions barring transfer to third parties.

The Rebuilding Economic Prosperity and Opportunity for Ukrainians Act (REPO Act) introduced by Senators Jim Risch (R-Idaho) and Sheldon Whitehouse (D-R.I.) along with Representatives Michael McCaul (R-Texas) and Marcy Kaptur (D-R-Ohio), permits the president to confiscate Russian sovereign assets owned directly or indirectly by the government. The confiscated money would be directed towards a Ukraine Support Fund handled by the US State Department through the US Agency for International Development, dedicated to reconstruction and humanitarian assistance.

The UK’s plan is yet under development but is anticipated to be one of the most aggressive measures, intending to seize Russian assets worth about $29 billion in the UK. This conflicts with US proposal to have G7 group $280 billion of frozen Russian state assets as collateral for generating $50 billion via Freedom Bonds that would yield annual bondholder interest payments of approximately $4 billion from underlying asset interests.

At the conclusion of this war, Russia could redeem its possessions by repaying their value in reparations to Ukraine. If declined, these assets would be sold off against bonds redemption.

This historic agreement within the G7 simplifies EU’s future plans and indicative that REPO Act may soon come into formative stages. To progress Putin’s War in Ukraine towards successful conclusion, not only should Russian financial and material resources be at stake but also it must ensure pain infliction on Putin and his close allies. Such actions mark a definitive first step towards those objectives.