Can Russia be forced to pay reparations to Ukraine?
In June, The World Bank estimated that the total cost of the war in Ukraine will cost $349 billion. The Prime Minister of Ukraine estimated that the war will cost Ukraine at least $750 billion to rebuilds its country. Ukraine will need to re-build its transportation, energy, health, education, and agricultural sectors.
Multilateral development banks and international financial institutions like the European Bank for Reconstruction and Development, European Investment Bank, and the World Bank cannot foot the entire reconstruction bill. U.S. institutions like USAID and the U.S. International Finance Corporation are willing to help, but only as much as U.S. taxpayers allow. Private sector engagement can help, but private companies are often hesitant to conduct business in unstable environments.
Many policymakers and government officials believe Russia should pay for the destruction they caused during their unprecedented and unjust invasion of Ukraine. Russia holds $585 billion in foreign currency reserves, but 22% of that is held in gold at home and 14% is held in China. The rest, about $350 billion, is technically available for use and is held in varying amounts in France, U.S., Germany, and Japan. In order for these Russian assets to be redistributed, however, countries will need to come together to agree upon a coordinated plan.
A plan for reparations needs legitimacy. The United Nations can grant this, but with Russia sitting on the Security Council, only the UN General Assembly would be able to grant a resolution, though it would not be legally binding.
On Monday the 14th, the UN General Assembly will meet to vote on a resolution that outlines Russian violation of international law and their responsibility to pay reparations. The draft of the resolution, acquired by the Associated Press, recommends the establishment of “an international mechanism for reparation for damage, loss or injury.”
The draft does not mention a price-tag for Russian reparations. Ukraine’s pre-war GDP stood at about $200 billion, so that could be a starting point. Moreover, Ukraine’s GDP grew by $2 billion in 2021, so if the country loses out on that growth for five years, then that is another $10 billion. These numbers are not accounting for human life and the emotional burden of forced displacement. If Russia ends up having to pay for the war, there are countless factors to consider when creating the final cost of the invasion.
While the UN General Assembly meeting is a good step, there are other options.
For example, the U.S. Senate Foreign Relations Committee has proposed legislation that would allow U.S. authorities to seize assets from Russian oligarchs and use those funds to finance Ukrainian aid. Many Europeans countries have called for the seizure of Russian central bank assets, but the U.S. has shown hesitation due to worries that other countries will be discouraged from keeping investments in the U.S.
It is also important to keep in mind that Russia sent half of its central bank reserves out of the country with the intention of shielding its economy from sanctions. Russia did not expect those assets to be frozen so quickly, as the international community took a much harsher pro-Ukrainian stance than was seen during the 2014 invasion of Crimea. Now, these funds cannot be used by Putin to fund the war or help Russia’s economy. However, there is not much precedence for seizure or re-ownership of the assets.
While it is widely agreed that Russia should take financial accountability for the destruction it has caused in Ukraine, the process for reparations is not simple. The lack of legal precedent, the fact that Russia has veto power on the Security Council, and the absence of international coordination leaves the question of financial responsibility open.