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Proposed trust fund for seized Russian assets has merit

Jul 5, 2023 | Politics, News, Ukraine, Life, Community, Editorials, Canada, World, Featured

By Marco Levytsky
Editorial Writer

A refugee advocacy group chaired by former Liberal Foreign Affairs Minister Lloyd Axworthy has come up with a proposal to create a trust fund to redistribute seized Russian assets to Ukrainians.

With a proposed name as the Canadian Ukrainian Social Impact Reconstruction Trust Fund, it would manage the disposition of Russian assets, and be overseen by independent managers with an emphasis on hiring Ukrainians.

This fund will provide money to support the most vulnerable people of Ukraine in the areas of education, healthcare, poverty alleviation, and environmental sustainability. It will also be used to support economic stability and victim of Russian aggression, including wounded or disabled veterans.

Another objective will be to back Ukrainian entrepreneurs and charities whose enterprises and endeavours promote the rebuilding of society and economy.

Axworthy says proponents of the plan hope to mobilize international support for turning over the proceeds of seized Russian assets to Ukraine in the same way that Canada garnered global backing in 1990 for its campaign to eradicate the use of landmines.

“It’s a Robin Hood proposition,” he said. “You take from the Sheriff of Nottingham who was putting people in jail, and you give it to the people who were affected by this.”

This is a welcome proposal and deserves international support. But the scope of the funding that will be needed to rebuild Ukraine is immense. The World Bank estimates the cost of reconstruction and recovery in Ukraine at US$411 billion – 2.6 times the country’s estimated 2022 GDP. And this estimate only covers the one-year period from Russia’s invasion of Ukraine on February 24, 2022, to the first anniversary of the war on February 24, 2023. No one knows how long this war will last and how much damage will be inflicted before it ends. This could easily cost trillions. So, who’s going to pay.?

Voters in many Western democracies are already complaining about the cost of supporting Ukraine with military aid. This is especially true of the MAGA (Make America Great Again) Republicans in the United States. Therefore, in certain quarters using taxpayers’ money to rebuild Ukraine will be met with considerable opposition. Another option, providing loans from the International Monetary Fund will saddle Ukraine with a draconian and unmanageable debt that will plunge the country even further into economic decline.

Thus, the most logical and morally appropriate solution is to use confiscated Russian assets, but this is fraught with legal difficulties. As the Washington Post pointed out in a June 15 editorial: “Confiscating Russian funds is a dangerous proposition, no matter how strong the moral, political and financial case. The assets themselves are protected under international law, and any legal challenge to seize them would be tied up in courts for years.”

Nevertheless, many countries are trying to find ways to overcome these obstacles.

Under the direction of Deputy Prime Minister and Finance Minister Chrystia Freeland Canada took a leading role by passing legislation allowing the seizure of Russian assets through its budget implementation bill over a year ago. But to date this has only been used twice – once to confiscate US$26 million belonging to a company owned by Russian billionaire Roman Abramovich, and then again last month to seize the Volga-Dnepr Antonov-124 cargo plane which had been parked at Toronto’s Pearson Airport for over a year. But there are also other assets available to liquidate. According to the RCMP, as of February this year, more than $135 million of assets in Canada have been frozen as a result of sanctions imposed on Russia.

In the United States, Republican and Democratic members of Congress introduced legislation on June 15 that would give the U.S. President the authority to confiscate Russian assets frozen in the United States and transfer them to help Ukraine. The Rebuilding Economic Prosperity and Opportunity for Ukrainians Act would also bar the release of funds to Russian entities under sanction until Moscow withdraws from Ukraine and agrees to provide compensation for harm caused by the war.

Meanwhile, the European Union, which has possession of €200 billion of Russian assets sitting mostly in accounts at Belgium-based Euroclear, but is reluctant to touch the principal, is looking at a plan to draw off the interest. This approach would probably deliver about €3 billion a year, according to Anders Ahnlid, the director general of the Swedish National Board of Trade and head of the EU working group looking into frozen Russian assets.

However, the amounts we are talking about here are not just a drop in the bucket, but more like a drop in the ocean if we take the full cost of Russian destruction into account. And, frankly, it is truly outrageous to be concerned with the niceties of International Law in this case, when one takes into consideration the extent to which Russians themselves have violated International Law in this genocidal war.

It’s time to stop mollycoddling Russia. Where there is political will, ways can always be found. In the United Sates, for example, three recent precedents for confiscating the assets of rogue states exist under the International Emergency Economic Powers Act — Iran, 1981; Iraq, 1991; and Afghanistan, 2022.

Many legal obstacles can be removed simply by designating Russia as a state sponsor of terrorism. But despite the evidence of all the horrendous atrocities being committed by Russian forces in Ukraine and the relentless slaughter of civilians, the only countries that have designated Russia as a state sponsor of terrorism to date are Czechia, Estonia, Latvia, Lithuania, the Netherlands, Poland, and Ukraine. Neither Canada, the United States and major European powers have done so.

This has to change. A trust fund to raise fund for Ukraine’s reconstruction is an excellent idea and must be implemented by all members of the G7 as well as other countries that value democracy and the rule of law. But, in order to be effective, this process must commence as soon as possible and to be able to access all Russian funds abroad. After all, many countries have legislation which allows them to seize the assets of organized crime. And what is Russia if not a state whose government is the greatest organized crime syndicate in the world.

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