Kyiv needs more resources and extra pressure must be put on the Kremlin. The legal and practical objections to putting frozen assets to good use can be overcome.
We are living through the most momentous, and unpredictable, period in world affairs in decades. Amidst this uncertainty, we have a choice: to be buffeted by events, permanently scrambling to respond to the decisions of others, or to take control of our collective future and use the full spectrum of our powers — including our ability to seize Russian assets — to bolster global security.
I applaud Keir Starmer for the pace and vigour of his diplomacy. The United Kingdom has a vital role to play at this moment: we are both America’s and Ukraine’s most trusted ally, and so we can act as a link between them. We must strive to make sure that they understand each other and their mutual interests.
The work that the government is putting in to try to get a partnership deal signed between Kyiv and Washington is to be commended. The way that President Zelensky was treated in the Oval Office was wrong — no head of state of a friendly nation should be treated like that, let alone one who has had to shoulder the burden of leading his country through a war of national survival for the past three years. But now we need to help bring Washington and Kyiv together as quickly as possible.
Two things are clear at the moment: Ukraine needs more resources and more pressure must be put on Russia. A policy that would help fulfil both these objectives is seizing the Russian state assets that are in our financial system.
I know from my time as chancellor and prime minister that there are significant legal and practical objections to this move. But as I said in parliament on Tuesday, I believe that these can — and must — be overcome.
First, the legal objections. Seizing the assets of another state is no small matter. But in this instance, I firmly believe that it is justified. When I was prime minister, the foreign secretary, David Cameron, made it clear repeatedly that the government saw no legal bar to the seizure of these assets. In a G7 call earlier this year, I urged the other members to adopt this position — and I do so again today.
• Britain must give Russia’s frozen assets to Ukraine, demand MPs
Russian state assets in our financial system are not entitled to protection given Vladimir Putin’s actions. Russia has so violated the principle of sovereign equality — that all states have a duty to respect the territorial integrity and political independence of other states — with its invasion of Ukraine that it cannot plead this as the basis for the protection of its assets.
Next, Russia will undoubtedly owe Ukraine reparations for the horrific damage that it has inflicted on the country. The size of these reparations will inevitably exceed the value of Russian state assets in our financial systems and those of our allies. So, seizing these assets is a reasonable counter-measure and can be regarded as a downpayment on the reparations that Russia will clearly owe Ukraine.
Indeed, given that about $300 billion (£230 billion) of Russian state assets is frozen — and that, as of last month, the World Bank estimated that the total cost of reconstruction and recovery is $524 billion over the next decade — it is clear the seizure of these assets will be insufficient to adequately compensate Ukraine. But seizing them and transferring them to Kyiv would be a start in this process.
First, the legal objections. Seizing the assets of another state is no small matter. But in this instance, I firmly believe that it is justified. When I was prime minister, the foreign secretary, David Cameron, made it clear repeatedly that the government saw no legal bar to the seizure of these assets. In a G7 call earlier this year, I urged the other members to adopt this position — and I do so again today.
• Britain must give Russia’s frozen assets to Ukraine, demand MPs
Russian state assets in our financial system are not entitled to protection given Vladimir Putin’s actions. Russia has so violated the principle of sovereign equality — that all states have a duty to respect the territorial integrity and political independence of other states — with its invasion of Ukraine that it cannot plead this as the basis for the protection of its assets.
Next, Russia will undoubtedly owe Ukraine reparations for the horrific damage that it has inflicted on the country. The size of these reparations will inevitably exceed the value of Russian state assets in our financial systems and those of our allies. So, seizing these assets is a reasonable counter-measure and can be regarded as a downpayment on the reparations that Russia will clearly owe Ukraine.
Indeed, given that about $300 billion (£230 billion) of Russian state assets is frozen — and that, as of last month, the World Bank estimated that the total cost of reconstruction and recovery is $524 billion over the next decade — it is clear the seizure of these assets will be insufficient to adequately compensate Ukraine. But seizing them and transferring them to Kyiv would be a start in this process.
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The fact that we, and our allies, are already using the interest on these frozen Russian state assets to benefit Ukraine, powerfully supports the case that there is no fundamental legal bar to action.
An additional, more practical, objection to the move has been that seizing these assets would undermine economic stability. The argument goes that doing so would lead to other states withdrawing their assets from our financial system. This has been a particular worry for many of our European allies.
However, events since Russia launched its latest invasion of Ukraine on February 24, 2022, show that this risk is overstated. Beforehand, Moscow tried to move its assets to places where it thought they would be safe from the consequences of its actions. Research by my colleagues at the Hoover Institution in America shows that Russia moved 87 per cent of its dollar holdings in America out of the country in the first two months of 2022. Yet countries have few stable places to place their assets where they will be safe even if they invade another sovereign state.
Just look at how $300 billion remains under the jurisdiction of America and its allies despite Moscow’s attempt to get ahead of this issue.
Additionally, the decision to freeze Russian state assets has not led to a flight of capital. Figures from the International Monetary Fund show that there has been no meaningful change in the share of dollar and euro assets in central bank reserves since Russian assets were frozen: they have gone, respectively, from 59 per cent and a fraction over 20 per cent to 59.17 per cent and 19.58 per cent in the second quarter of 2023.
First, the legal objections. Seizing the assets of another state is no small matter. But in this instance, I firmly believe that it is justified. When I was prime minister, the foreign secretary, David Cameron, made it clear repeatedly that the government saw no legal bar to the seizure of these assets. In a G7 call earlier this year, I urged the other members to adopt this position — and I do so again today.
• Britain must give Russia’s frozen assets to Ukraine, demand MPs
Russian state assets in our financial system are not entitled to protection given Vladimir Putin’s actions. Russia has so violated the principle of sovereign equality — that all states have a duty to respect the territorial integrity and political independence of other states — with its invasion of Ukraine that it cannot plead this as the basis for the protection of its assets.
Next, Russia will undoubtedly owe Ukraine reparations for the horrific damage that it has inflicted on the country. The size of these reparations will inevitably exceed the value of Russian state assets in our financial systems and those of our allies. So, seizing these assets is a reasonable counter-measure and can be regarded as a downpayment on the reparations that Russia will clearly owe Ukraine.
Indeed, given that about $300 billion (£230 billion) of Russian state assets is frozen — and that, as of last month, the World Bank estimated that the total cost of reconstruction and recovery is $524 billion over the next decade — it is clear the seizure of these assets will be insufficient to adequately compensate Ukraine. But seizing them and transferring them to Kyiv would be a start in this process.
The fact that we, and our allies, are already using the interest on these frozen Russian state assets to benefit Ukraine, powerfully supports the case that there is no fundamental legal bar to action.
An additional, more practical, objection to the move has been that seizing these assets would undermine economic stability. The argument goes that doing so would lead to other states withdrawing their assets from our financial system. This has been a particular worry for many of our European allies.
However, events since Russia launched its latest invasion of Ukraine on February 24, 2022, show that this risk is overstated. Beforehand, Moscow tried to move its assets to places where it thought they would be safe from the consequences of its actions. Research by my colleagues at the Hoover Institution in America shows that Russia moved 87 per cent of its dollar holdings in America out of the country in the first two months of 2022. Yet countries have few stable places to place their assets where they will be safe even if they invade another sovereign state.
Just look at how $300 billion remains under the jurisdiction of America and its allies despite Moscow’s attempt to get ahead of this issue.
Additionally, the decision to freeze Russian state assets has not led to a flight of capital. Figures from the International Monetary Fund show that there has been no meaningful change in the share of dollar and euro assets in central bank reserves since Russian assets were frozen: they have gone, respectively, from 59 per cent and a fraction over 20 per cent to 59.17 per cent and 19.58 per cent in the second quarter of 2023.
This should give central banks and finance ministries confidence that seizure would not lead to capital flight and any meaningful risk to financial stability. I am confident that transferring these Russian assets to a compensation trust that would rapidly pay out to Kyiv would have no effect on London’s standing as an international financial centre.
Another argument often made is the danger of Russian retaliation against western businesses and their assets. But the majority of these businesses are already in the process of leaving Russia. Those that continue to operate there, despite explicit warnings, do so aware of the clear risk that they are running. We cannot let this tail wag the dog.
The current geopolitical situation adds urgency to the imperative to seize Russian state assets. First, Ukraine needs financial support without delay as it continues to defend itself against this brutal assault. Second, there is a danger that if these assets are not seized now, Ukraine may never get the support it needs and the compensation it deserves.
There are two scenarios in which Russia may get away without paying the reparations that it owes. The first is that this war may become a frozen conflict, with no formal resolution. In these circumstances, it is hard to believe that the political will to maintain this freeze on Russian state assets would sustain indefinitely. So we would be faced with the obscene situation where these assets were returned to the Russian state while Ukraine was just left to live with the damage that Russia had so gratuitously inflicted on it.
The second is where Ukraine is forced to the negotiating table by a brutal withdrawal of support. This would leave Russia with the whip hand in these talks, and Moscow would surely demand the return of these assets as part of any agreement.
There is a danger that we fall into accepting that we now live in a binary world where the strong do as they will and the weak do as they must. But I would say to our European allies that we must realise we have power ourselves, and we must use it to ensure that Ukraine can receive a measure of justice as it responds to Russia’s war of aggression. One immediate step to doing that is to seize these Russian state assets.
The work of this decade will be to adjust to the new world we are living in. The increase in defence spending that will be required in the coming years will require a radical restructuring of the state. It is not credible to think we can simply borrow the money needed, and nor is it compatible with the dynamic economy to which we aspire to just raise taxes to pay for this. Instead, we will have to restructure the state. This will require us to have a clear sense of what we want the state to achieve and what we need it to do.
There were many fine words spoken last week as leaders made clear their determination to support Ukraine. But now is a time for action. We must move to seize Russian state assets and transfer them to Ukraine so it can defend itself at its moment of maximum need.
Rishi Sunak was Britain’s prime minister from 2022 to 2024. He is the MP for Richmond and Northallerton and is the William C Edwards distinguished visiting fellow at the Hoover Institution.