Brainstorming Russian Reparations

I'd like to spend a little more time thinking about the proposal, discussed in my March 18 post, that we use Russia's money to rebuild Ukraine. The first mention I saw of this idea is in Robert E. Litan's article at the Brookings Institute website. By Litan's reckoning, Western countries and Japan are holding about $350 billion of Russia's foreign policy reserves; these reserves are currently "frozen" by the sanctions placed on Russia. The fact that the reserves are called "frozen" and not "seized" implies they will be "unfrozen" some day – presumably when Russian troops are withdrawn from Ukraine.

This chart from Statista illustrates the distribution of the reserves.

Source: Statista.com

 Litan wrote "the fact that many countries already have control over Russia's holdings of foreign currency means that, in effect, reparations for the Ukrainian invasion have been pre-funded by Russia itself." Moreover, "there is a basis in international law for enabling nations that hold these reserves to commit them to pay for damages."

Russia has committed on a massive scale what under U.S. law is considered an “intentional tort”: unprovoked violence, which requires at a minimum that the aggressor pay damages for human suffering, deaths, and property losses. In December 2005 the United Nations General Assembly adopted a resolution affirming a variation of intentional tort doctrine by providing a right to reparations to victims of human rights abuses under international law.

The U.N. resolution is not self-enforcing, however. Instead, it charges member states to establish “national programs for reparation and other assistance to victims in the event that the parties liable for the harm suffered are unable or unwilling to meet their obligations.” It’s a safe bet that Russia won’t be willing to meet these obligations, so other countries now holding Russian reserves can best enforce the reparations principle by agreeing on a common plan.

Litan's Brookings article was originally published at Bloomberg.

There are several things to recommend this approach:

• Turning all the frozen reserves back to Russia would mean that it gets to walk away from the damage it has done.

• Russia's failure to help rebuild Ukraine means it would be entirely on the hands of, and dependent upon the generosity of, other countries.

• The reserves can be used right now to provide help to Poland, Hungary, Slovakia, Romania, and Moldova, the nations that have generously welcomed 3 million Ukrainian refugees. They simply can't afford to do this forever, however, and who better to pay for it than Russia?

• Perhaps knowing that every school, hospital, and apartment building destroyed by a Russian bomb or missile will be replaced using Russia's own money might incentivize Putin to reconsider further aggressive activities and negotiate a withdrawal as soon as possible, to cut his loses.

But there are arguments against confiscating and using Russian reserves in this way:  

• Instead of making Putin anxious to conclude his invasion, the action might frustrate, humiliate, and infuriate Putin to the point that he takes a spiteful action that requires a NATO response.

• There is that old law of unintended consequences. We must ask ourselves how unsettling actual confiscation, as opposed to "freezing," will be to the world financial system. It is beyond my ability to even imagine.
  

There may be a way to use the threat of reserves confiscation without actually taking the action. Let's say an American congressman introduces a resolution in the House that the reserves should be seized for refugees and reparations. A resolution is not a law, and the State Department and our allies would be under no obligation to do it. But a resolution might get Putin's attention, and encourage him to get ahead of things by working harder at negotiations.