Will Tomorrow’s Ukraine Conference In Berlin Focus On Desires Or Money Sourcing? Taxpayers Pay For Russia’s Deeds? Chancellor Scholz’s “Marshall Fund” Or US$340 Billion Already Available?
Round-Two… Will Tomorrow’s Berlin Ukraine Conference Be Another Focused Upon Desires Rather Than First Agreeing To Sourcing?
113 Days Since Previous Ukraine-Focused Reconstruction Conference, Will Berlin’s Effort Repeat Mistakes And Ask Again Taxpayers To Pay For Russia’s Deeds?
Will Chancellor Scholz Again Ask For “Marshall Fund” For Ukraine Or Advocate Use Of The US$340 Billion Already Available?
The Prize Within Easy Reach Is US$340 Billion- Why Can’t Government Officials Believe That?
Unlike Two-Day Relaxed Lugano Schedule, One-Day Berlin Conference Is Tightly-Scripted.
Unlike Lugano, No United States Government Officials
“I am politically open to the idea of seizing foreign assets of the Russian Central Bank. We are already having this discussion in the G7 and the EU, and there are proposals on the table.” Christian Lindner, Federal Minister of Finance of Germany
The total value of reported Central Bank of the Russian Federation (CBRF) assets frozen since 24 February 2022 is approximately US$340 billion. These assets have been collecting interest.
According to Hamburg, Germany-based Statistica, the CBRF frozen assets are in France (US$71 billion), Japan (US$58 billion), Germany (US$55 billion), United States (US$38 billion), United Kingdom (US$26 billion), Austria (US$17 billion), and Canada (US$16 billion) among other countries. However, the government of Germany has reported approximately US$4.3 billion as the total value of Russian Federation-related assets frozen.
Tomorrow, 25 October 2022, in Berlin, Germany, leadership of the European Commission (EC) representing the twenty-seven member countries of the European Union (EU), heads of state (four; two virtually), heads of government (three; one virtually), representatives of international financial institutions, experts, and participants from non-governmental organizations (NGO’s) will convene at the Westhafen Event and Convention Center (WECC) for the International Expert Conference on the Recovery, Reconstruction and Modernisation of Ukraine. The conference is hosted by the government of Germany and the EC.
On 4/5 July 2022, the Swiss Confederation (Switzerland) hosted a similarly-themed Ukraine Recovery Conference (URC022), at the Congress Centre in the city of Lugano. The conference was scheduled prior to 24 February 2022, but retitled subsequently.
Prior to the conference in Lugano concluding its first day, the then Boris Johnson Administration of the United Kingdom (England, Scotland, Wales, and Northern Ireland) reported it would host a similar conference in 2023. Will the expected Rishi Sunak Administration be as welcoming given the focus on government spending (higher taxes and high fees), the swelling national debt, underfunded education, and healthcare?
By 24 February 2023, one year from the day the armed forces of the Russian Federation invaded and invaded further into the territory of Ukraine, the Biden-Harris Administration (2021- ) in the United States will have sought cumulative approximately US$100 billion in funding relating to Ukraine.
What increasingly haunts the Biden-Harris Administration is its preparation for Janet Yellen, United States Secretary of the Treasury, to rationalize the transfer to Moscow of US$38 billion in Central Bank of the Russian Federation funds rather than use the funds to offset what will be US$100 billion in taxpayer borrowing relating to Ukraine. How will the expected Republican Party majority in the United States House of Representatives convening on 3 January 2023 react?
For Vladimir Putin, President of the Russian Federation, he, and his economy take measured solace with confidence the United States, EU-member countries, among others will return the US$340 billion in assets (plus interest) of the Central Bank of the Russian Federation.
He has reasons to be optimistic. There are officials in governments and leadership in financial institutions who suggest that confiscating the US$340 billion will lead to potential consequences- countries may not place assets in the countries who froze and then confiscated and then redirected the funds; countries may use alternative currencies to the United States Dollar, United Kingdom Pound Sterling, Euro, and Yen, among others.
There are officials and executives who suggest that the US$340 billion can be a carrot for the government of the Russian Federation to cease its war against Ukraine. That will be a carrot of limited appeal. Of note, the spokesperson of the government of the Russian Federation declared months ago that confiscation of the assets would be “outright theft.”
Recently, a potential plot twist that may deliver [slight] indigestion to President Putin. Within the construct of an answer by Karine Jean-Pierre, Assistant to the President and Press Secretary at The White House in Washington DC, to a question about responsibilities of the government of the Russian Federation to Ukraine: “And, you know, as you saw -- I was just mentioning the G7 leaders -- they put out a statement [11 October 2022] following their meeting with President Zelenskyy today, you know: “[We] welcome President Zelenskyy[’s] readiness for a just peace,” which would “include the following elements: … ensuring Ukraine's recovery and reconstruction, including exploring avenues to do -- to do so with the funds from Russia;” and “pursuing accountability for Russian[’s] crimes committed during the war.” Today, the odds continue quite good for all or most of the US$340 billion returning to Moscow.
Olaf Scholz- Berlin Plan OK, Please No Marshall Plan
The government of the Russian Federation may not need retain law firms to seek the return of its frozen assets- the political leadership of those countries which are supporting Ukraine may do it for them.
Olaf Scholz, Chancellor the Federal Republic of Germany, and current chair of the Group of Seven (G7) Industrialized Nations (Canada, France, Germany, Italy, Japan, United Kingdom, United States), continues to lead amongst heads of state and heads of government the effort to reconstitute a global taxpayer-funded 21st Century version of the 20th Century’s US$15 billion in value “Marshall Fund” which after World War II concluded in 1945 served from 1948 as a financial mechanism to reconstruct countries located on the European Continent, including Herr Hitler’s Germany whose crossing the border of Poland in 1939 commenced the conflict.
Chancellor Scholz prefers having taxpayers in thirty or so countries borrow a potential US$150 billion to US$500 billion to US$1.1 trillion for use in reconstructing (more accurately, according to the government of Ukraine, any funds should not be used to replicate what Ukraine had prior to 24 February 2022, rather funds should be used to create 22nd Century Ukraine; so, a Ukraine version of the United States’ “Build Back Better” using other people’s borrowed funds to achieve it) the infrastructure of Ukraine rather than use some or all approximately US$340 billion in assets of the Central Bank of the Russian Federation which have been frozen by governments.
As a former Minister of Finance of the Federal Republic of Germany, his preference for borrowing rather than using cash-on-hand is inexplicable.
Will be instructive to watch how Chancellor Schulz and particularly Joe Biden, President of the United States, engage in linguistic contortions worthy of a circus performance to explain why they have authorized the electronic transfer of billions of dollars to the Central Bank of Russian Federation.
If they and their head of state and head of government colleagues successfully convince their respective legislatures, voters, and taxpayers as to the wisdom of re-imbursing the government of the Russian Federation for its attack upon Ukraine, then they should be nominated for and be awarded the Nobel Prize in Literature and Sveriges Riksbank Nobel Prize in Economic Sciences.
Redirecting Energies Of Zelensky And Shmygal
On 4/5 July 2022, in Lugano, Switzerland, the first morning remarks by Denys Shmygal, Prime Minister of Ukraine, “We believe that the key source of recovery should be the confiscated assets (US$300 billion to US$500 billion) of Russia and Russian oligarchs. The Russian authorities unleashed this bloody war. They caused this massive destruction, and they should be held accountable for it.”
The same day, Volodymyr Zelensky, President of Ukraine, shared that reconstruction is the “common task of the whole democratic world. Reconstruction of Ukraine is the biggest contribution to the support of global peace.”
What Messrs. Shmygal and Zelensky should be saying to those governments- and the taxpayers whom they represent, is not one penny of funds for the reconstruction of Ukraine should precede the expenditure in totality of funds obtained from the government of the Russian Federation, meaning the Central Bank of the Russian Federation. Not one penny.
As written previously, the government of Ukraine believes that there is a collective responsibility of “the West” for not doing more in 2008, 2014, and in 2022. From the perspective in Kyiv, all invoices are to be directed to “the West.”
The government of Ukraine and at least one of its “oligarchs” holds firmly that at the historical core, those governments whose decisions did not dissuade prior to 2008 the government of the Russian Federation from its invasion of Georgia (Abkhazia and Ossetia), did not dissuade again the government of the Russian Federation prior to its 2014 invasion of the Crimean Peninsula and Donbas Region (Donetsk and Luhansk) in Ukraine, and again by not acting proactively prior to the 2022 further invasion of the Donbas Region, and other areas of Ukraine, the receipts for the cumulative damages inflicted upon Ukraine are the responsibility of members of the EU, NATO, and primarily the United States- meaning their respective taxpayers.
From Lugano, Madness And Hubris.
The proverbial table has been set for those governments who have frozen their respective portions of approximately US$340 billion in assets of the Central Bank of the Russian Federation to return all or some of those assets rather than use all of them to fund reconstruction of Ukraine and court judgements relating to civil and criminal lawsuits and findings against the government of the Russian Federation.
Participants at the 4/5 July 2022 conference in Lugano described an atmosphere of jubilance- rejoicing (salivating is more precise) in the potential of feasting upon what may be US$540 billion to US$1.1 trillion (May 2022 outlandish estimate of European Investment Bank- EIB) in infrastructure repair, revitalization, renovation, reconstruction, redevelopment, development, etc. projects… a trough of potential revenues so enticing that a conflict nowhere near an end, let alone an intermediate cessation of offensive and defensive activities is realistically in a forecast.
The government of Ukraine has no hesitation for promoting that they have no preference as to who pays for the damages inflicted upon the territory of Ukraine by the armed forces of the Russian Federation.
Funds from the Central Bank of the Russian Federation; funds from “oligarchs”; funds from the twenty-seven members of the EU; funds from the thirty members of NATO; funds from the 193-member New York, New York, based United Nations (UN); funds from financial institutions including the EIB, European Central Bank, European Bank for Reconstruction and Development, International Monetary Fund, World Bank, International Finance Corporation; and particularly from the taxpayer coffers of Canada, Japan, State of Israel, United Kingdom, United States among others.
Critical to appreciate that the funding from each of the above-identified entities derive from taxpayers- and any funds focused or repositioned for use in Ukraine will be borrowed- not taken from a savings account or account surplus- taxpayers throughout the world will be asked to borrow, pay interest upon that borrowing, and the repayment duration will be in the decades.
What Is So Difficult?
Why is so challenging for the government of Ukraine, and political leadership of the EC/EU, NATO, the United States, and other countries to collectively accept, embrace:
The armed forces of the Russian Federation inflicted the damage to Ukraine, so the government of the Russian Federation is responsible for 100% of the payment for that damage. All assets of the government of the Russian Federation are to be frozen, confiscated, liquidated if necessary, and serve as the currency to pay for damages inflicted upon Ukraine.
Where Is The Ukraine Utopia?
On 23 February 2022, the government of Ukraine and the commercial, economic, and political infrastructure of Ukraine was deemed by most governments and organizations and in reporting by journalists as among the most corrupt in the world.
Why is there now a common thought that commencing on 25 February 2022 all corrupted DNA in Ukraine has been vanquished. That the devastation brought about directly by the government of the Russian Federation has created a New & Improved Ukraine? Where anti-corruption laws, regulations, and policies are sacrosanct. Where the legal system is walled-off from political interference. Where the financial system is transparent. Where “oligarchs” and yes, there are individuals subject to Ukraine jurisdiction who have accumulated wealth using many of the same tools as have “oligarchs” subject to Russian Federation jurisdiction, have accounted those assets. The truth is there has been no change to all the corrupted DNA in Ukraine. There has been no time for that to have happened. The government of Ukraine and the citizens of Ukraine continue to fight a war.
If Ukraine is so appealing after 24 February 2022, why were not the number of companies with Direct Foreign Investment (DFI) in Ukraine far greater prior to 24 February 2022? A war must not be the become a nectar; the resulting marketplace is the foundation. Ukraine as a member eventually of the EU will be rewarding for the approximately forty-four million citizens of Ukraine and for companies who employ those citizens.
Why does the leadership of the EC and EU so very eager to ask its collective approximately 400 million taxpayers spread amongst its twenty-seven members to pay for the reconstruction of Ukraine- and seem willing to do so without staking a claim to any of the US$340 billion in funds of Central Bank of the Russian Federation frozen throughout the EU and in countries outside of the EU- the United States for example with approximately US$38 billion? The talk is tough, but the details scant.
Fear of the government of the Russian Federation seizing EU and other country assets? Fear of other countries relying less upon the Dollar, Euro, Pound, and Yen to avoid sanctions? Fear of setting a precedent for future conflicts?
Reconfiguring The Priorities.
Before governments (and their funded financial institutions) begin to forage for what will be taxpayer funded resources they can disburse for the creation of a plan for a plan, the creation of a plan to implement the plan, the creation of a plan to implement, and then implement whatever it is the bureaucracy believes is deliverable, there needs to be mutually agreeable and recognizable landscape from which to contemplate the future.
For example, unknown will be the square footage of Ukraine that will be subject to control by the government of Ukraine. Is a justifiable expenditure of time and taxpayer resources today to craft a reconstruction model for the city of Mariupol, for areas within the Donbas Region (Donetsk and Luhansk), northern portions of the city of Kharkiv while the armed forces of the Russian Federation occupy these areas? Does now make sense to focus upon the process and costs of moving housing and commercial properties from areas in Ukraine which may remain under control of the government of the Russian Federation to areas in Ukraine which are, and likely will remain under control of the government of Ukraine. All discussions are academic and hypothetical absent to realities: cessation of conflict and creation of known boundaries.
One certainty will be advisories, brokerages, consultancies, and intermediaries (including legions of the most unsavory sort), are orgasmic about the potential multi-year, multi-decade revenue stream of fees in the service of reconstructing Ukraine.
Some of these enterprises will not actually do anything: Highly compensated executives will not use a shovel to dig a hole. They will pay someone who will pay someone who will pay someone to dig the hole- and along the pathway to digging that hole, every intermediary will take a percentage- a percentage of taxpayer funds.
And there will be an extraordinary capacity for corruption- payoffs, handouts, bribes, excessive fees, hiring of relatives and friends… US$540 billion to US$1.1 trillion can bring about an altering of anyone’s DNA and make an already corrupted DNA superhuman.
How will those governments and financial institutions provide and distributing taxpayer funds in Ukraine account for how those funds are disbursed? Who will audit? Who will audit the auditors? How will corruption be prosecuted?
Conclusions
But, first-things-first…. Before spending time crafting a list of what Ukraine will want, what Ukraine will say that it needs, before tallying the potential money-making opportunities for governments and private sectors… first, determine how much there is available to be spent.
When purchasing a home or a vehicle, customers do not first decide on the features they want to have… they determine how much they have to spend….
Same goes for Ukraine.
COMPLETE ANALYSIS IN PDF FORMAT
From The Author:
As reference points, I arrived in the city of Kyiv, Ukraine, on 20 February 2022 and was in the city of Kharkiv on 24 February 2022. I have embarked on other journeys within Ukraine since those dates; and was again in Kharkiv on 24 August 2022. I have continued to travel to Belarus, Russia, Turkiye, Poland, United Kingdom, and Belgium with respect to research. My international career began in the then-U.S.S.R. and the then-Republics of Byelorussia and Ukraine were a focus.
My analyses have focused upon the sourcing funding for the reconstruction and other payments to Ukraine. Specifically, I have focused upon the acquisition and use of the US$340 billion in Central Bank of the Russian Federation funds frozen in some countries, including Germany. Additional analyses may be read at https://www.issueinsight.org.
