Hundreds of billions of dollars in frozen Russian assets are held in the West - time to seize them
Donald Trump likes to talk cards. Despite Volodomyr Zelensky’s justified reminder during that Oval Office argument that “I am not playing cards”, the US President often returns to the theme. The Ukrainians, he declares, have no cards, while Russia holds a lot.
This is helped by the United States’ own decisions to stack the deck in Moscow’s favour: stripping Ukraine of access to American intelligence denied their air defences early warning and laid open Ukrainian troops occupying the Kursk salient to a conveniently timed Russian offensive.
The card metaphor is a useful insight into how the White House thinks. By Trump’s logic, if you hold the cards then you have options. You can take the initiative, you can force others to do as you wish, and you can negotiate. Without cards, you are at the mercy of the decisions of others.
We didn’t choose this game, but the United States has decided that we should all play it. It’s therefore important that all participants assess what they have at their disposal in order to use it to maximum effect. Failing to do so means surrendering the timing and terms of what happens next to others, whether in Washington or Moscow.
Viewed through that lens, Ukraine and its allies had three things going for them before Trump came to office. The first was Ukrainian-held territory in Russia’s Kursk region. As mentioned, the Ukrainian army is currently retreating there.
The second is the determination and skill of the Ukrainians. This enabled their armed forces to repel the initial assault on Kyiv, to turn Putin’s three-day coup de main into a three-year meat-grinder, to defeat Russia’s Black Sea fleet, and to regain swathes of territory in Kharkiv. That isn’t going away any time soon – Ukraine now has the most battle-tested modern military in the world, a highly effective intelligence service and a cutting-edge domestic defence industry.
The third asset is the hundreds of billions of dollars in frozen Russian central bank assets held in the West, which I urged the UK and Europe to seize in a recent column. This is a card we on this side of the Atlantic have the chance to play – most of these funds are in Europe and the UK, not the United States. It is also the card most finely balanced between being capitalised upon to great effect or being lost for good.
The idea of seizure has been gaining momentum. In recent weeks, a cross-party coalition of Westminster parliamentarians, including former PM Rishi Sunak, came out in support, while the French Parliament passed a non-binding resolution in favour of the idea last week.
However, time to act is short: it’s likely that Trump will try to barter this cash with Putin, even though the US does not have it. European nations would strengthen their hand by playing rather than holding this card – indeed, doing so would compel Russia and America to include them in negotiations rather than bypassing them.
There are other good reasons to seize the initiative. If the United States decides to unfreeze the relatively small amount of Russian Central Bank assets it holds, effectively lifting a key plan of sanctions on Russia, then pressure will mount for Europe to do the same.
The EU’s sanctions require regular, unanimous renewal – which Hungary’s Viktor Orban, a notorious Putin-sympathiser, almost blocked a few weeks ago. It would be foolish to wait and risk having this card taken out of our hands unilaterally.
The return of these assets to Russia would represent a major reward for Putin, a huge missed opportunity for Ukraine, and a loss for the UK and Europe, which urgently need a way to finance rearmament.
There are practical ways to make the most of the opportunity to force Russia to pay for at least some of the damage done by its aggression. A Ukrainian proposal for a Ukraine Restitution and Reconstruction Bank (URRB), financed by the seizure of these frozen assets, offers one way forward.
Establishing a formal reconstruction bank as recipient and investor of the assets in a European nation – Belgium for example, where much of the cash currently sits – and subject to British, European and Ukrainian oversight, would give several advantages.
First, proactively investing the funds would generate much larger returns than they currently produce. Right now, some of the interest on the frozen assets is given to Ukraine, and a loan has been raised backed by some of the future interest – but the assets’ frozen status limits the returns available. But transferring them to an actively administered fund, investing for higher returns, could generate more money for Ukraine on an ongoing basis, much of which would then be spent with European and British defence and infrastructure firms.
Second, such a fund would further address many of the (poorly founded) allegations of waste or fraud in existing funding of Ukraine, via transparency, oversight and the fact that the assets would be in a European jurisdiction.
The truth is that even with the best of intentions, the embattled Ukrainian state would likely struggle to handle and effectively deploy such a large quantity of money in a short period of time – a dedicated institution with a board formed of G7 countries, the EU and Ukraine would provide proper oversight.
So far, Trump has made all the running. We can sit in stunned disarray and then swallow whatever he chooses, on his terms, once he deigns to let us know what it is. Or we can take serious action, and play the hand we have to its best effect.
Mark Wallace is chief executive of Total Politics Group