No Compromise on Assets

The question of possible negotiations with Russia has recently become one of the main topics in the media space. Obviously, Russia doesn't want any peace, especially now when its military has achieved advances on the battlefield. Their goal remains the complete subjugation of Ukraine. However, this doesn't mean that Russia won't want to take advantage of a tactical pause, setting traps for our partners and Ukraine, among which could be a demand to unfreeze the Russian central bank's assets worth $300 billion, currently immobilized in G7 and EU countries, either as a precondition for negotiations or as an agreement for a ceasefire.

 Neither the Ukrainian authorities nor our partners should agree to this under any circumstances. Ukraine's receipt of these funds is one of the pillars of guarantees for our long-term security, available resources for reconstruction, compensation for victims of aggression, and strengthening our defense capabilities.

The potential return of these resources to Russia would have a number of catastrophic consequences far beyond Ukraine.

If the $300 billion in assets were to be unfrozen and returned to Russia, the aggressor country would receive not only a pleasant unexpected bonus as a reward for aggression but also an instant powerful financial resource to strengthen its war machine and accelerate preparation for the next phase of war. To understand the scale: $300 billion is slightly less than three annual Russian military budgets for 2024, which is $112 billion.

Moreover, after all the Russian atrocities that the world witnessed in Bucha, Mariupol, or Bakhmut, after Ukraine has already suffered damages exceeding $800 billion, unfreezing assets would be interpreted as weakness not only by Russia but also by China, which is closely watching how the Kremlin learns to circumvent Western sanctions.

Full confiscation for Ukraine - justice and security guarantee.

Instead, the complete confiscation and transfer of these assets to Ukraine will play an important role in the future of Ukraine and Europe. Against the backdrop of allegations about corruption of unprecedented scale in our country, which have intensified parallel to talks about a quick end to the war and pacification of the aggressor, we propose a transparent, effective, and accountable mechanism for managing confiscated Russian assets that will take into account Ukraine's urgent needs and partners' concerns.

It is proposed to create a new development bank with the draft title "Ukrainian Bank for Restitution and Reconstruction" (UBRR), which will manage the confiscated assets. A positive precedent after World War II was the creation of a separate bank for reconstruction in Germany - KfW.

The functions of the new bank would include financing Ukraine's reconstruction, ensuring restitution for victims of aggression, supporting the country's macrofinancial stability and promoting European integration reforms, as well as supporting strategic industries, particularly the defense sector.

Beyond reconstruction, compensation, and development of Ukraine, this bank could become a source for generating significant additional funds to meet our weapons needs. Currently, of all institutions where Russian central bank assets are frozen, only Belgian Euroclear generates profits from the $191 billion frozen there: in 2023, this was €4.34 billion before taxes, and the same amount is expected in 2024. The EU has directed these profits to support Ukraine starting February 2024. Beginning in 2025, these profits will cover the $50 billion in loans that G7 countries and the EU provided to Ukraine.

However, the confiscation of assets for Ukraine and their transfer to the new bank could significantly increase these profits. Unlike Euroclear, which doesn't aim to maximize profits, UBRR would purposefully invest these funds in more profitable assets. According to British banker and financial expert Timothy Ash, a portfolio of assets in emerging markets can provide returns of 10%. It is from these funds that Ukraine will be able to systematically and long-term purchase American and European weapons, making the proposal for full confiscation more attractive to President Trump and European leaders.

Since most Russian sovereign assets are currently frozen in the Belgian securities depository Euroclear, and to increase our partners' trust and ensure process transparency, the UBRR headquarters could be located in Brussels, with a Board of Directors comprising representatives from the US, EU countries, and Ukraine. The bank's CEO must be a Ukrainian citizen, selected through an open and transparent competition determined by such board.

Former U.S. Deputy Secretary of Defense during President Trump's previous term, Elaine McCusker, calculated in a Foreign Affairs article that Russia's victory in Ukraine would cost the US an additional $800 billion over the next five years. Helping Ukraine survive and win will be much cheaper, especially if partners can do it using Russian assets.

Olena Halushka, co-founder of the International Center for Ukrainian Victory and board member of the Anti-Corruption Action Center

Daria Kaleniuk, Ukrainian civic activist and executive director of the Kyiv-based AntiCorruption Action Center