Ukraine Minister of Justice Seeks Confiscation of Russian Assets

WASHINGTON (03-13) – As the war in Ukraine continues with its daily death toll and destruction growing under a ceaseless barrage of canon fire and rocket attacks, the question of who will pay for the physical damages when the war ends, a hotly debated subject, has already been resolved in Ukraine. Presently, the World Bank estimates those damages including its patrimony and cultural assets at over $500 billion dollars and growing.

With Russian state assets of around $286 billion dollars being held in the western banking systems, Ukrainian Minister of Justice Denys Leontiyovych Maliuska at the United States Institute of Peace (USIP) on March 13 discussed the possibility of using those funds for its reconstruction as well as its defense. He went on to note that clearly the Russian assets would not be sufficient to cover the complete costs associated with reconstruction.

How these funds can be used thusly is still being debated when considering how the Russian government could retaliate by seizing western assets under its jurisdiction. Another pitfall might entail other governments removing their assets from American and European banks to protect themselves from future confiscation due to their aggression.

The discussion was timely in that as the war has dragged on, European financial assistance has been waning along the U.S. assistance that has been put on hold as Congress debates appropriations directed towards Ukraine including military aid.

In his opening remarks, Minister Maliuska spoke directly as to how the jurisdiction of his Ministry in the matter is directed as its “primary goal, the seizure of Russian assets outside of the country.”

When Maliuska was asked by moderator and former Ambassador at Large for War Crimes David Scheffer about the possibility that the seizure of the yet unfrozen assets could be used for both reconstruction as well as for defense, Maliuska responded that originally, they had considered the assets being used only for reconstruction and that Russian assets that were being held in Ukraine have already been used in those efforts.

Now, however, having recently assessed a new reality that indicates by the end of 2024 or in 2025, “We will not have sufficient funds to cover non-military needs, all of our taxpayers’ money we collect is all spent on the war effort.”

For non-military needs, Ukraine must now rely on “…direct financial assistance or loans and the appetite with our partners for helping us is decreasing with time.” Maliuska referred to utilizing the Russian assets for military purposes as a “more pessimistic” idea. Rather, they would like to use some of the funds for our budgetary needs to run the government and as a last resort would be forced to use the funds on military needs. “Under necessity, if we have no other choices, we would accept that as well.”

When asked by Ambassador Scheffer to identify the governments who hold Russian assets, Maliuska listed the G7 governments, the EU Commission, U.S., Germany, France and Belgium. With Belgium holding the largest share of the Russian assets, with some 200 billion dollars of the 286 billion because of Euroclear, the financial services company headquartered there who specialize in servicing security transaction settlements and in guarding their safekeeping.

Maliuska said: “From the legal perspective, we do not see any major problems in confiscation, there is existing law and existing rules that allows that” while reflecting that if a country did not have existing laws or a framework for such, they would “be open for discussion” to implement such an agreement to confiscate funds.

Ambassador Scheffer recognized that in February “The G7 came out with a very strong statement on the view of the G7, that Russia must pay reparations to Ukraine.” He furthered with the fact that France, Germany and the U.K. are still “on the fence” as to how this can be concluded.

When asked about the right of Ukraine to seek reparations and what the mechanics of seizures would be, Maliuska indicated that there were several different approaches varied by country but that, “The U.S. has several bills aimed at complete confiscation.” Which he characterized as “quite radical and a justified approach.”

As a part of a team that tried to negotiate a peace treaty at the beginning of the war in 2022 in the aftermath of the full scale invasion, Maliuska said that during a short period of negotiations with Russia, “One of the major and crucial demands of the Russian delegation was that we sign a waiver and refuse to require any sort of reparations on compensation and that all our lawsuits to international tribunals be withdrawn. We clearly understand that Russia will never pay reparations unless there is a regime change.”

Ambassador Scheffer opined that using the example of Russia in Ukraine in seeking confiscation of sovereign funds to pay reparations that “…In a sense is creating a new type of deterrent in international affairs. Towards a very strong message that if as a nation you commit the worse crimes which is massive aggression, which is resulting in massive atrocity crimes and everything comes together and you are responsible for it, then there is an opening in international practice and I think precedent under international law, there is a deterrent that is justifiable. Which is, if you have assets overseas, they can be frozen and ultimately confiscated for the worse type of behavior we can imagine by a nation state.”

Applying this principal internationally would impose a significant financial obligation on Israel’s ongoing destruction and genocide in Gaza exposing the nation to confiscation of sovereign assets and reparations for damages. Exposing anyone’s finances to confiscation may have the desired deterrence that for so long has eluded those seeking peace.

However, one may only have to think back to WWI when Germany was forced to pay reparations for war damage that in turn drove its economy into destruction and planted the seeds for WWII.

Report and photos by Phil Pasquini

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