“Authors: Olena Halushka, member of the board of the Communist Party of Ukraine, co-founder of the International Center for Ukrainian Victory, Daria Kaleniuk, executive director of the Anti-Corruption Center. Many experts are now competing in predictions of what Trump’s presidency means for Ukraine.”, — write: www.pravda.com.ua
Authors:
Olena Halushka, member of the board of the Communist Party of Ukraine, co-founder of the International Center for Ukrainian Victory
Daria Kaleniuk, executive director of the Anti-Corruption Center
Many experts are now competing in predictions about what Trump’s presidency means for Ukraine. But the fact is that until the inauguration on January 20, 2025, no one knows for sure what decisions the new US president will make in order to fulfill his promise to quickly end the war in Ukraine.
At the same time, there is a decision that may be made by the incumbent President Biden in the next few weeks. It is about the confiscation of Russian sovereign assets seized in America. In April of this year, Congress passed the REPO Act, which authorizes the President of the United States to carry out such confiscation. To speed up this process, Ukraine should offer America and other partners a vision of an institution for an international fund, where the confiscated Russian money will go.
“Now there are 300 billion dollars of frozen Russian assets. They are Ukraine [росіяни] according to estimates of international institutions, destroyed about 800 billion dollars… Everyone says: what will you do if Trump does not support you financially, where will you take weapons, how will you defend yourself? I answer you. And we can take 300 billion that belong to us. We will support our people and use this money to buy weapons in all countries of the world.”President Zelenskyi said during the press conference following the results of the summit of the European Political Community on November 7.
On October 25, Ukraine’s partners, the countries of the Group of Seven, finally agreed to issue loans to Ukraine for $50 billion, which will be repaid with proceeds from frozen Russian assets. Thus, this aid should come to Ukraine in the form of grants. Although this is an important step on the way to using Russian money for Ukraine’s needs, this amount is not enough either to punish Russia for its aggression or to ensure a Ukrainian victory.
Advocacy for the complete confiscation of the assets of the Russian central bank remains one of the main priorities of our work at the International Center for Ukrainian Victory and the Anti-Corruption Center. Over the past year, we have prepared eleven analytical briefs refuting the arguments and fears of our partners regarding the legal, financial and political aspects of confiscation, and even focused in detail on researching the legal systems of Germany and France.
While Europe takes a wait-and-see attitude, the United States could pave the way for total confiscation. But for this, Ukraine also needs to quickly do its homework.
The Law on Restoration of Economic Welfare and Opportunities for Ukrainians (REPO Act), adopted by Congress in April of this year, gives the US President the authority to confiscate Russian sovereign assets frozen in the country or on correspondent accounts in dollars. The law authorizes the president for the purposes of such confiscation to create a special account called the “Ukraine Support Fund”, which should be administered by the US Secretary of State in consultation with USAID to compensate Ukraine for damages caused by the full-scale aggression of the Russian Federation, starting on February 24, 2022.
Also, the REPO Act provides for the creation by the United States, in coordination with partners from the G7 countries and Ukraine, of an international mechanism for managing all Russian confiscated funds — the Common Ukraine Fund, where it is expected that Russian assets confiscated in the United States will go. and in other countries. The President of the United States, according to the law, must ensure that the “Joint Ukrainian Fund” will belong to an institution that has a plan to ensure transparency and accountability of the use of the transferred confiscated money. Moreover, the President of the United States must submit this plan to Congress in writing. The REPO Act states that confiscated funds can be spent on reparations, reconstruction of Ukraine, humanitarian support and other purposes that support the Ukrainian people.
On October 30, 2024, the US Treasury, in compliance with the requirements of the REPO Act, submitted a report to Congress, in the public part of which it is reported that 5 billion dollars have been seized in the accounts of the Central Bank of the Russian Federation in America. At the same time, part of the report is classified and, according to our data, it indicates a much larger amount of seized assets of the Russian Federation on correspondent accounts denominated in US dollars.
In the interim period, the administration of President Biden can use the powers granted by Congress and become the first country to confiscate Russian assets. This will become a precedent and give confidence and determination to other, mainly European countries, where more than two hundred billion dollars of seized Russian money is concentrated. It is important for Ukraine to get additional arguments to convince its European partners to do the same – and confiscate all 300 billion dollars. Moreover, it is critical that Ukraine plays a decisive role in deciding where and how this money will be used, while satisfying the important requirement of partners for “transparency and accountability”. It should be understood that none of the partners either in the USA or in Europe is ready to transfer such a huge amount of money directly to Ukraine.
That is why Ukraine must now act proactively and quickly and offer its vision of an international “Joint Ukrainian Fund”, which will satisfy the expectations of the American legislator and allay the fears of our European partners, who have not yet dared to confiscate Russian assets, because “the EU financial market will collapse”. there will be an outflow of reserves of third countries from the EU”, “Ukraine is not able to spend this money efficiently and transparently”. And the most important thing is that in the end, the confiscated assets could be managed by Ukrainians, and not by foreigners in various international institutions, which depend on the political will of their countries and their voters, who are often easily manipulated by Russian propaganda. We have carefully analyzed all available financial instruments to support Ukraine, taking into account their strengths and weaknesses, as well as the historical experience of financing the reconstruction of countries after the war, and below we offer a vision of the financial mechanism that the Zelenskyi government could offer now to Biden, and later to European leaders.
Ukrainian Bank for Restitution and Reconstruction with headquarters in Brussels (UBRV) What is this idea and what is the purpose of restoring Germany after the Second World War?
After the end of the Second World War, the USA was rebuilding the destroyed Europe. The US Marshall Plan of aid to 16 European countries from 1948 to 1952 is the most successful post-war economic recovery program in world history. However, even more interesting in this context is the reconstruction of post-war Germany: a special financial institution was created for this country , through which the allocation of US funds was channeled. At the operational level, KfW (Kreditanstalt für Wiederaufbau), a newly created development bank with a special and exclusive purpose, was engaged in this. The first billion from the Marshall Fund went to this bank.
KfW played a key role in rebuilding war-torn Germany by providing cheap loans to develop infrastructure, industry and small businesses. After the completion of major German economic recovery programs, KfW began to engage in broader development issues both at home and abroad, becoming one of the largest development banks in the world.
Such a bank is necessary for Ukraine as well, but its functionality can and should be further expanded. After all, currently, among the existing institutions and mechanisms through which Western aid is implemented for Ukraine, none is perfect: either the funds can be used only for budgetary support without military expenditures, or Ukraine does not have subjectivity in the decision-making process, or the tools become hostages of the political games of foreign politicians.
That is why the creation of a new instrument that can simultaneously finance Ukrainian recovery and reconstruction, as well as our defense industries and provide compensation to victims of Russian aggression, is important not only for the development of Ukraine. It will also be a new argument in the international debate on asset forfeiture.
This bank should function according to the following principles.
Transparency and accountability while preserving the decisive influence of Ukrainians on decision-making. If the bank’s supervisory board consists of representatives of the G7 and the government of Ukraine, it will ensure partner control and Ukraine’s participation in management. It is also important that the bank is headed by a Ukrainian CEO who will be responsible for recovery and compensation. Ukrainians must make up at least 50% of the bank’s staff. This will give our government officials the opportunity to represent the position and interests of Ukraine, directly influencing decision-making. It is morally right that the restoration of Ukraine should be done by Ukrainians with Russian money. But of course, there should be a transparent mechanism for selecting this CEO: he should be a competent, virtuous and independent person.
A diplomatic compromise for Europe. We understand the fear of our European partners, especially the Belgians and the French, of losing €191 billion and around €22 billion respectively, as they believe that such a significant outflow of capital could have a negative impact on their financial stability. That is why we propose to place the UBRV in one of the EU countries, namely in Belgium, where this money will remain physically, but will work in a different way to generate stable annual high profits for the interests of Ukraine.
In addition, the bank can invest these funds, generating a higher income than the Belgian Euroclear. The task of the latter is not to maximize income on frozen Russian assets, but to manage these assets as safely as possible, as a result of which it was possible to earn a total of about 5 billion Euros in 2022-2023. However, British investment banker and economist Timothy Ash estimates that investing confiscated Russian assets in high-yielding assets, such as those in emerging markets, could generate higher returns of up to 10%, or about $30 billion a year. This would help to close the existing loan of 50 billion dollars much faster. and further finance Ukrainian defense and macro-financial needs with these revenues, or, according to a similar principle of financial engineering, generate a much larger loan now, which will then be repaid with higher future revenues.
In his public communication with the leaders of the Western world, President Zelenskyy correctly notes that the seized Russian money should be immediately confiscated and transferred to support Ukraine, but now, in addition to statements at the top level, it is very important that our government at the operational level work out a technical solution that takes into account fears and reservations of our partners, but at the same time, corresponds to the national interests of Ukraine. The window of opportunity for a precedent to seize the first $5 billion in Russian seized assets is now upon us. It will only last for the next 10 weeks.
Olena Halushkamember of the board of the CPK, co-founder of the International Center for Ukrainian Victory
Daria Kaleniukexecutive director of the Anti-Corruption Center