Should Russia compensate Ukraine for rebuilding – or for defeating its own invasion? | Update on Russia-Ukraine conflict

In February 2022, following the invasion of Ukraine, Russia quickly lost control of assets held by its central bank in foreign currencies abroad. Approximately $300bn was frozen by allies in the European Union, United States, United Kingdom, Canada, and Japan, making up about half of the bank’s holdings. This move was aimed at hindering Russia’s ability to continue its war efforts.

While the money legally belongs to Russia, the European Union, holding the largest portion at around $207bn, is facing challenges in deciding how to use these funds to rebuild Ukraine’s infrastructure. Some experts suggest that utilizing Russia’s funds could provide immediate benefits to Ukraine’s war efforts, especially considering the stalled $60bn US military aid in Congress.

Discussions have begun on potentially using the profits from investing Russia’s money, estimated at around $2.5bn, to support Ukraine’s recovery and reconstruction. This could total between $15bn and $17bn over four years, and experts argue this is essentially a recognized debt owed by Russia for its actions in Ukraine.

There are varying opinions on how to handle Russia’s frozen assets, with suggestions ranging from investing in the defense industry to supporting Ukraine’s war efforts. The legal and political implications are complex, and there are concerns about potential retaliatory actions by Russia and the impact on global reserve currencies like the US dollar and Euro.

Despite these considerations, EU leaders are exploring legal avenues to use Russia’s assets in a way that upholds justice for Ukraine while protecting the reputation of the Euro. Countermeasures are being considered as a response to Russia’s aggression, with the aim of inducing compliance from the state, while also ensuring any actions taken are temporary and reversible.

The decision to utilize Russia’s assets in this manner would mark uncharted territory in international law and could face challenges in European courts. However, the ongoing political situation, including delays in US funding for Ukraine and Russia’s continued aggression, may push for a reevaluation of the untouchability of Russian assets.

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