With regard to Philip R Wood’s letter “How ‘Big Mullah’ theory helps Ukraine’s case for reparations” (March 14), the simplest way to use Russia’s frozen assets to help Ukraine would be to hand them over to Kyiv. But this is not the wisest option.
A better alternative would be to lend Ukraine the $300bn, secured by Kyiv’s claim for war damages against Moscow. Some European countries, which are sitting on the bulk of the frozen assets, are worried that outright seizure would contravene international law and could lead China to desert the euro. But a so-called “reparation loan” would not run into the same problems. The idea, which we have presented to politicians in G7 countries and which was set out in a paper published by the American Enterprise Institute, is gaining traction.
It would work as follows. Holders of frozen Russian assets would lend Ukraine $300bn. In return, Kyiv would pledge as collateral its claim against Moscow for war reparations. An International Compensation Commission would assess Ukraine’s claim for war damages. If the Kremlin refused to pay, the lenders would foreclose on their collateral, effectively inheriting the claim against Russia. The lenders would then set off that claim against the frozen assets.
This mechanism relies on two established legal principles. First, that countries are required to pay reparations if they illegally invade another country. Second, that a creditor can set off a debtor’s assets against its unpaid debts. Its solid legal basis may be why Friedrich Merz, the incoming German chancellor, is interested in the idea.
A reparation loan should also provide comfort to those, such as the European Central Bank, who are worried that confiscation could hurt the euro. The UN General Assembly has called for a compensation mechanism. Russia’s assets would only be set off against its reparations bill after a tribunal had awarded damages against Moscow and the Kremlin had refused to pay.
Donald Trump has made clear he wants peace in Ukraine. The US president has twisted Ukraine’s arm to get it to agree to a ceasefire. G7 foreign ministers have now discussed applying pressure to Russia to force it to agree to one too. An obvious way to do that is to threaten to give $300bn to Kyiv if Moscow keeps fighting — and to get the money indirectly from the Kremlin’s own reserves. But Europe must be careful not to damage itself in the process. That’s why a reparation loan is a wiser option than outright confiscation.
Hugo Dixon
Commentator-at-Large, Reuters
London W10, UK
Lee Buchheit
Honorary Professor, University of Edinburgh Law School
Edinburgh, UK
