Using sanctioned Russian assets to rebuild Ukraine will not be easy by Camino Mortera-Martinez and Zach Meyers
Funding Ukraine’s reconstruction with confiscated assets from Russian elites will be legally complex. Seizing Russia’s frozen foreign reserves may prove easier. As the Russian invasion of Ukraine continues, policy-makers are beginning to look at the cost of post-war reconstruction – a figure Ukraine estimates at over $750 billion and the European Investment Bank believes could be as high as €1 trillion. The EU’s current support of €6.2 billion pales in comparison. And yet – given that Russia is unlikely to agree to pay for the destruction it has wrought – the EU is expected to bear much of the cost of rebuilding Ukraine, not least as it is a candidate for EU membership. While European support for Ukraine remains steady (for now), governments are starting to get nervous about growing demands on their budgets. One increasingly salient question is how to justify the bill for reconstruction to European taxpayers, with inflation on the rise, swelling defence expenditure and a looming recession. Come autumn, EU leaders will have to tell their citizens to curb their energy consumption and brace for a further rise in the cost of living. They will be understandably wary of asking their voters for more money to rebuild war-torn Ukraine. So EU capitals and the EU institutions are looking for other ways to cover the bill. One idea making the rounds in Brussels is to confiscate Russian assets which have been frozen under EU sanctions – namely, the assets of sanctioned Russian elites and Russia’s foreign reserves held in the EU – sell them, and channel the proceeds to Ukraine. But liquidating Russian
assets would only be worthwhile for the EU if it was legal, feasible and sufficiently lucrative. Take private assets. Article 215 of the Lisbon Treaty allows the EU to impose sanctions on both entities and individuals, including freezing their assets. The EU keeps several lists of sanctioned individuals and organisations whose assets must be frozen – ranging from Russian oligarchs and Syrian mercenaries to members of terrorist organisations. As of April, the EU had frozen approximately €30 billion of Russian and Belarusian boats, real estate, artwork and other assets. But the EU does not have the power to confiscate and liquidate these frozen assets unless they are the proceeds of crime, and many EU countries have investment treaties with Russia which protect Russian investments from arbitrary expropriation. That protection would continue to apply to existing investments, even if member-states terminated the treaties. That is why the European Commission has come up with a plan to make breaching sanctions a ‘euro-crime’ – a particularly serious crime with a cross-border dimension, for which the EU sets baseline rules to try to ensure that all memberstates criminalise it and apply roughly similar penalties. This would make it easier for the EU and its member-states to confiscate the assets of Russian and Belarusian oligarchs who try to trick the system, for example by diverting