The Ukraine Question Few Governments, Financial Institutions (Including ECB, EIB, IMF, OCED, U.S. Department Of The Treasury, World Bank) Want To Answer.  14 Requests, 6 Responses To US$340 Billion Question.  

Although Government Officials- Within And Outside Of The Russian Federation And Ukraine, Are Increasingly Annoyed By The Question, The Issue Will Neither Vanish Or Lessen In Importance…. The Issue Will Become More Consequential, Particularly For Politicians. 

Not The Responsibility Of Taxpayers Outside Of Ukraine And The Russian Federation To “Build Back Better” The Infrastructure Of Ukraine. 

About Accountability: Russian Federation Broke It; They Only Must Fix It.
About Fairness: Other Countries Should Not Pay Anything To Repair Ukraine.

Question Posed On 27 June 2022: “Does [NAME OF ENTIY] support confiscating assets (reported as approximately US$340 billion) of the Central Bank of the Russian Federation which have been frozen by governments for the reconstruction of infrastructure damaged as a result of decisions by the armed forces of the Russian Federation from the 24 February 2022 deployment in Ukraine?  The US$340 billion would be used to offset the estimated reconstruction costs of US$540 billion to US$1.1 trillion (European Investment Bank estimate).”  

European Bank For Reconstruction And Development (EBRD)
European Central Bank (ECB)
European Commission (EC)
European Investment Bank (EIB)
European Parliament (EP)
International Finance Corporation (IFC)
International Monetary Fund (IMF)
Organization For Cooperation And Economic Development (OCED)
The White House
United States Department of State
United States Department of the Treasury
United States Federal Reserve
United States International Development Finance Corporation (IDFC)
World Bank

On 4 July 2022, the government to Ukraine presented a US$750 billion multi-part reconstruction (including for 80,000 buildings damaged/destroyed), multi-decade construct for Ukraine, including optimistically those areas under control of the armed forces of the Russian Federation since 2014 and since 24 February 2022, to commence during and continuing post-disputes with the government of the Russian Federation.  From Denys Shmyhal, Prime Minister of Ukraine: “This is Russia’s attack on everything that is of value to you and me.  Therefore, the reconstruction of Ukraine is not a local project- not a project of one nation- but a joint task of the entire democratic world.” 

As of 8 June 2022, direct damage to the infrastructure of Ukraine was estimated at US$103.9 billion by the Kyiv School of Economics.  The government of Ukraine has issued previously and subsequently that damage to infrastructure ranged from US$300 billion to US$540 billion to US$600 billion; and the Luxembourg City, Luxembourg-based European Investment Bank (EIB) estimated the value at US$1.1 trillion. 

Quick Math:  Damage to Ukraine estimated at US$103.9 billion.  Government of Ukraine wants reconstruction not to bring infrastructure in Ukraine to its pre-24 February 2022 condition, it wants “entire democratic world” to pay for a 21st-22nd Century Ukraine where everything is not only replaced, but generationally advanced.  Value of Central Bank of Russian Federation assets frozen outside of the Russian Federation: approximately US$340 billion.  So, US$340 billion minus US$103.9 billion equals US$236.1 billion which may then be used for a) not-yet-calculated infrastructure repair/replacement b) compensate claimants (criminal and civil) against the government of the Russian Federation and armed forces of the Russian Federation c) reimburse taxpayers in those countries impacted directly by the war- Poland, Slovakia, Hungary, Romania, Moldova and d) those countries providing support- European Union (EU), NATO, United States, Canada, etc.  

Not the responsibility of taxpayers outside of Ukraine and the Russian Federation to “Build Back Better” the infrastructure of Ukraine. 

The 4.2 square mile Metinvest B.V.-owned Azovstal iron and steel works in Mariupol, Ukraine, which had approximately 11,000 employees, and which commenced operations in 1935, is controlled by the armed forces of the Russian Federation.  For planning purposes, inconsistent with reality to expect today the facility will be reconstructed in place and managed by Metinvest B.V.  Thus, if a new location is identified further west in the territory of Ukraine, and whatever the cost of that reconstruction and potential repurposing, why should any party (taxpayers) other than the government of the Russian Federation be asked, invited, requested, required to fund whatever is the outcome?    

Denys Malyuska, Justice Minister of Ukraine: “Currently, they [government of the Russian Federation] are protected by sovereign immunity, but our understanding is that assets of a state [that] started a war, committed aggression, shall not be protected by sovereign immunity.  We are suffering from economic losses, and it does not make sense to cover all those losses by Ukrainian or European taxpayers’ money.” 

Janet Yellen, United States Secretary of the Treasury: “I think it’s very natural that given the enormous destruction in Ukraine and huge rebuilding costs that they will face, that we will look to Russia to help pay at least a portion of the price that will be involved.”  

Yes, Secretary Yellen said that the Russian Federation should “help pay at least a portion.”  What is Secretary Yellen’s position on who should pay survivors of decisions by the government of Germany from 1939 to 1945 impacting the European Continent and North Africa, and the atrocities ordered by officials of the Hitler Administration? 

Reality Check for Secretary Yellen: What do you believe will be the 2024 re-election prospects for Joseph Biden, 46th President of the United States, and in 2022 and 2024 for the Democratic Party in the United States Congress (House of Representatives and Senate), and for keeping your job when the United States Secretary of the Treasury is concerned more about redirecting the approximately US$38 billion in assets of the Central Bank of the Russian Federation frozen in the United States because doing so may result in countries directing assets away from the United States and from using the United States Dollar for fear that they too could have central bank assets frozen, confiscated, and then transferred to third parties?   

Secretary Yellen should be more concerned about the precedent permitting the armed forces of one country to invade the territory of another country and third countries will make payment for the damage inflicted.  If there are no consequences for an action, what deterrent exists? 

When a company does wrong in a country, the government of that country seeks restitution (criminal, civil) from the company- not from a company or companies located in other countries.  Remember the Pottery Barn Rule: You break it, you own it.   

If Secretary Yellen succeeds in absolving the government of the Russian Federation of its financial obligation to pay 100% of the damages inflicted upon the territory of Ukraine, then Secretary Yellen will have become the single most important, most valuable asset of the government of the Russian Federation- the US$38 billion agent of influence.  Who needs a spy when one person can write a check for US$38 billion? 

Inflation in the United States and other countries is in part a result of too much spending by governments and what results, expected and unplanned.  To reduce inflation, reduce spending.  Why then would Secretary Yellen advocate United States taxpayers borrow, adding to the annual deficit, adding to the national debt funds relating to Ukraine rather than using approximately US$38 billion that is already in control of the United States Department of the Treasury and then seeking additional funds under control of other governments? 

One workaround:  No funds would be returned to the Central Bank of the Russian Federation until the government of the Russian Federation has repaid Ukraine for all commercial, economic, and political infrastructure damage, including satisfying criminal court decisions and civil court judgements. 

When the United States Department of the Treasury publicly confirms that it electronically transferred approximately US$38 billion to the Kremlin and then President Biden asks the United States Congress to borrow (and add to what taxpayers already owe) approximately US$38 billion to send to the government of Ukraine to make payment for what was done to Ukraine by the armed forces of the Russian Federation?  Spelling R-E-S-I-G-N-A-T-I-O-N. 

Chrystia Freeland, Deputy Prime Minister and Minister of Finance of Canada: “Canada recognizes- and this was a view shared by our G7 [Canada, France, Italy, Germany, Japan, United States, United Kingdom] partners that Ukraine’s financial needs are huge- the needs for the rebuilding are huge, and it is entirely appropriate for the aggressor to help pay for that rebuilding.” 

The governments of Estonia, Latvia, Lithuania, and Slovakia have advocated for the twenty-seven member Brussels, Belgium-based European Union (EU) to use the approximately US$340 billion in Central Bank of the Russian Federation assets frozen by governments for the reconstruction of Ukraine so that the Russian Federation is “held accountable for its actions and pay for the damage caused.” 

The Biden-Harris Administration (2021- ) maintained since the fall of 2021 in public and in private directly and indirectly to the government of Ukraine that the government of the Russian Federation was preparing to instruct the armed forces of the Russian Federation to invade into the territory of Ukraine.  The Biden-Harris Administration, accompanied by other governments, also since the fall of 2021 in public and in private conveyed that an invasion into the territory of Ukraine would be accompanied by commercial, economic, and political sanctions against the government of the Russian Federation. 

NOTE: However, on 16 July 2022, Dr. Jill Biden, wife of President Biden, shared at a fundraising event for the Washington DC-based Democratic National Committee (DNC) that “He’s just had so many things thrown his way.  Who would have ever thought about what happened [United States Supreme Court ruling on] Roe v Wade?  Well, maybe we saw it coming, but still we didn’t believe it.  The gun violence in this country is absolutely appalling.  We didn’t see the war in Ukraine coming.” Bold emphasis added 

Knowing the statements by the Biden-Harris Administration, including messages delivered face-to-face in Moscow by officials of the Biden-Harris Administration, why did not the Central Bank of the Russian Federation return to the Russian Federation or shift to “friendly” countries the approximately US$340 billion in assets held in other countries in advance of 24 February 2022? 

One answer:  The government of the Russian Federation calculated that the assets of the Central Bank of the Russian Federation would not be targeted or targeted reluctantly by other governments as those governments would fear similar seizing of their assets in response- not today, but someday.  Thus far, not a bad bet.  

A result thus far:  The armed forces of the Russian Federation have inflicted more than US$100 billion in damage to infrastructure in Ukraine.  Governments are focused upon the feel-good seizure of aircraft, residences, bank accounts, investment accounts, shareholdings, and yachts to fund the reconstruction of Ukraine.  And the approximately US$340 billion?  That is ready to be returned to Moscow.  

One option: Inform the Central Bank of the Russian Federation that the approximately US$340 billion in funds frozen will remain so until the government of the Russian Federation has paid directly or reimbursed governments (their taxpayers) for funding (currency and equipment and humanitarian assistance) directed to Ukraine and to companies and individuals for the destruction to infrastructure in Ukraine, and adjudicated liability from criminal convictions and civil judgements.  In this way, governments who have been thus far loath to confiscate the frozen funds to reimburse their taxpayers will enable a workaround to preserve “sovereignty” of the assets belonging to the Central Bank of the Russian Federation.  Mr. Dimitry Peskov, spokesperson for the government of the Russian Federation, shared that confiscation and use of assets of the government of the Russian Federation for benefit of Ukraine would be “illegal, blatant, and of course requiring an appropriate response... It would be, in fact, outright theft.”    

The Following Are Answers Received To The Question Posed On 27 June 2022: “Does [NAME OF ENTIY] support confiscating assets (reported as approximately US$340 billion) of the Central Bank of the Russian Federation which have been frozen by governments for the reconstruction of infrastructure damaged as a result of decisions by the armed forces of the Russian Federation from the 24 February 2022 deployment in Ukraine?  The US$340 billion would be used to offset the estimated reconstruction costs of US$540 billion to US$1.1 trillion (European Investment Bank estimate).”  

The White House
Sent 12 July 2022
Response 19 July 2022

I would point you to the legislative proposal we’ve sent up to Congress on establishing new authorities for the forfeiture of property linked to Russian kleptocracy and allow the government to use the proceeds to support Ukraine https://www.whitehouse.gov/briefing-room/statements-releases/2022/04/28/fact-sheet-president-bidens-comprehensive-proposal-to-hold-russian-oligarchs-accountable/  And then pointing you to the recent commitment by G7 to seek authority to use revenues collected by new tariffs on Russian goods to help Ukraine and to ensure that Russia pays for the costs of its war.  https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/27/fact-sheet-the-united-states-and-g7-to-take-further-action-to-support-ukraine-and-hold-the-russian-federation-accountable/    

United States Department of State
Sent 27 June 2022
Response 27 June 2022

The following is provided on background, attributable to a State Department spokesperson:  The United States supports all international efforts to promote accountability for war crimes and other atrocities committed by members of Russia's forces in Ukraine.  In addition to investigations by the International Criminal Court, the UN, the Experts Mission established by invocation of the OSCE’s Moscow Mechanism, we welcome proceedings before the International Court of Justice and the European Court of Human Rights, which are adjudicating state responsibility.  There is a long history of sovereign nations paying reparations for their breaches of international law to the aggrieved state after an armed conflict. This may follow a peace agreement or a Security Council resolution to this effect. We are studying all available options in this regard.  We will continue to work with the international community on ways to promote accountability and to help Ukraine rebuild.  

United States Federal Reserve
Sent 24 June 2022
Response 24 June 2022

This question is likely better suited for the Treasury Department, as they are the agency that administers and enforces sanctions. You can reach their press office at press@treasury.gov  

European Commission (EC)
Sent 27 June 2022
Response 27 June 2022

Confiscation of Russian Central Bank assets: What is important to keep in mind is that freezing of assets is different to seizing and even more confiscating them. In most Member States, this is not possible and a criminal conviction is necessary to confiscate assets. Also, legally speaking, private entities and central bank assets are not the same and very different rules apply.  The discussions also continue in the context of the Freeze and Seize Task Force. On 25 May, the Commission proposed to make the violation of restrictive measures an EU crime and to revise and strengthen the current EU rules on confiscation and asset recovery.  Of course, it is clear that everything we do needs to be based on the rule of law and the rules-based order we stand for in Europe.    

Support to Ukraine: The EU Freeze and Seize Task Force is also looking into how to use the confiscated assets to the benefit of Ukraine, which was discussed and supported by the EU leaders during the May Summit.  The Commission is carefully looking into what national law of Member States allows for in this regard. You have, however, to take into account that confiscation as such would need to meet the standards of relevant national criminal law.    

European Investment Bank (EIB)
Sent 12 July 2022
Response 13 July 2022

As this is a financial policy matter, it is up to the member states and the EU institutions, such as the European Commission or the ECB, to discuss this matter. The EIB is not in a position to comment.  As of 2014, the EIB has effectively ceased all operations and has not financed any projects in Russia, following the sanctions implemented by the EU and subsequent decisions by the European Council.  The Bank’s compliance guidelines state that I can’t be quoted by name as a spokesperson.  Thanks again for reaching out to us. 

European Central Bank
Sent 24 June 2022
Response 24 June 2022

Thanks for checking but we prefer not to comment.

LINK TO COMPLETE ANALYSIS IN PDF FORMAT