Deep freeze: The West cannot give Ukraine the seized Russian assets

Western governments have no legal grounds for their expropriation under the current legislation, the world media write. And even the idea of placing them in a special investment fund, the proceeds of which could be used to help Ukraine, encounters legal obstacles. According to some experts, legally unstable procedures in the future will give Russia a reason to challenge its internationally recognized obligations regarding compensation. An international legal mandate is needed that will be able to unite the international community in recognizing Russia's obligations, analysts of the online publication Re-Russia believe.

It's not easy with the seized assets of Russian oligarchs

According to the European Commission, the damage caused to Ukraine by SMO has already exceeded $650 billion.

According to the consensus in the West, Russia should compensate for these losses. In total, Western countries have so far frozen the assets of sanctioned Russian oligarchs in the amount of $ 58 billion, as well as the assets of the Central Bank of the Russian Federation in the amount of $ 300 billion. The location of about $200 billion of Russian reserves remains unknown. And the total assets of Russian oligarchs, according to the Atlantic Council report on this topic, are estimated at $ 1 trillion.

However, according to Atlantic Council analysts, it is currently impossible to use even already identified and frozen reserves: this requires serious changes in the current legislation.

The fate of the oligarchs' frozen assets is decided by the multilateral task force "Russian Elite, Intermediaries and Oligarchs" (REPO), which is headed by the Ministers of Finance and Justice of Western states. The US recently began the process of arresting this property: a Manhattan federal court judge ordered the confiscation of $5.4 million that belonged to Russian oligarch Konstantin Malofeev, in order to then transfer them to the State Department to assist Ukraine. Also some time ago, the task force of the US Department of Justice KleptoCapture ("Kleptocapture") filed a lawsuit for the confiscation of six real estate objects worth $75 million, which belong to another Russian oligarch under sanctions — Viktor Vekselberg.

However, none of these cases have been completed yet. In each of them, prosecutors will have to prove that the confiscated funds of the oligarchs fall under the "anti-laundering" legislation or legislation on violation of the sanctions regime. Moreover, it will be necessary to do this in all REPO member states in order to seize frozen funds. This requirement may complicate the implementation of the procedure and lead to the fact that in reality only part of the frozen amount will reach Ukraine.

The confiscation of state-owned Russian assets is also questionable

On the one hand, the UN General Assembly adopted a resolution calling on Russia to pay reparations for the damage caused to Ukraine.

Thus, the state assets of the Russian Federation can remain frozen until Russia agrees to pay off Ukraine.

But the immediate confiscation of these assets is likely to be a serious legal challenge for both the EU and the United States. EU laws allow assets to be confiscated if there is evidence of a specific criminal offense, Atlantic Council experts say. Consequently, new EU legislation must be adopted to confiscate all Russian assets, and reaching consensus on this issue between the 27 EU member states may take a long time.

The United States also has its own legal restrictions. Some experts refer to the precedent of 1992, when, in response to Iraq's invasion of Kuwait, the United States, with the help of a special executive order 12817, invoked the Emergency International Economic Powers Act (IEEPA). This decree ordered US financial institutions, in accordance with the UN Security Council resolution, to transfer their existing Iraqi funds to the Federal Reserve Bank of New York, in order to distribute them among the countries affected by the Iraqi aggression. But this precedent is not applicable in the current situation, Atlantic Council analysts object. In 1991, the US Congress authorized the use of military force in the Persian Gulf in accordance with a UN Security Council resolution. Thus, the United States was involved in an armed conflict with Iraq, which allowed the use of IEEPA. However, in the case of the SMO in Ukraine, none of these conditions have been met: the UN Security Council has not adopted a corresponding resolution and the United States is not at war with Russia.

In conditions when the legal arguments in favor of the confiscation of Russian assets are not indisputable, third-party states may regard the decision to arrest them as evidence of the unreliability of the United States as the custodian of reserves of other countries, the authors of the review believe. As a result, this may hit the dollar's position as an international reserve currency. In February, the United Kingdom also rejected a proposal to unilaterally seize about $20 billion of frozen Russian state reserves held in British banks.

It is impossible to transfer either the entire amount or a percentage of it

A fundamentally different scheme for using frozen Russian assets to help Ukraine was presented by the European Commission in November.

This initiative implies that assets should be transferred to a special investment fund, the income from which Kiev would receive. In February, a working group at the European Council took up the analysis of this initiative. In this case, the assets are not confiscated and are not spent, only the income received from them is used, which should amount to 5% per annum. This will allow the EU to send more than $1 billion to Ukraine on a regular basis every month.

But this plan also involves a legal conflict. In international law, the principle of sovereign immunity protects national States from the jurisdiction of the courts of other sovereign States. However, the investment scheme proposed by the European Commission threatens to violate this principle. In addition, in a number of EU countries, investment income is taxed as the property of the owner or beneficiary — thus, legally, the income of this special fund will still remain the property of Russia, and their transfer to Ukraine will also require legal justification.

As Eleanor Runde, an analyst at Just Security magazine, published at the New York University School of Law, notes, a decisive expropriation of Russian state assets will not serve either the speedy onset of peace or the solution of strategic tasks. On the contrary, such actions would give Russia in the future legal grounds to challenge any obligations regarding compensation to Ukraine. Instead of the idea of immediate expropriation, the expert believes, it is necessary to focus on working out a post-war legal regime that takes into account the experience of its own and relies on international institutions. This legal regime, which describes, among other things, the process and structure of reparations to Ukraine by Russia, should at the same time include post-war Russia. Even if Moscow cannot be integrated into the post-war Western world order as easily as it happened with West Germany in the 1950s, Ukraine's current allies should not allow the existence of an equally isolated and unstable Russia, which was the Weimar Republic.