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It Could Cost $1 Trillion to Rebuild Ukraine. Russia Must Pay

Russia's Su-57 Stealth Fighter
Image: Creative Commons.

A very high bill is due when it comes to Ukraine. Who is going to pay?

A recent article in The Economist noted that the preliminary cost to rebuild Ukraine would be between 220 and 540 billion dollars. The UK-based Investment Monitor goes further. It estimates that the reconstruction cost will rise to one trillion dollars. This sum will snowball as the war drags on because the Ukrainians will have to rebuild entire cities.

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The Merriam-Webster dictionary defines reparations as “the act of making amends, offering expiation, or giving satisfaction for a wrong or injury.” War is the ultimate injury that one nation can inflict upon another. The fact that the Russian assault on Ukraine was unprovoked adds gravity to the wrongs inflicted on Ukraine.

Regardless of the result of the war, as the instigator, Russia and its elites will be responsible for indemnification. This indemnification will include compensation in money or materials for damages to Ukraine and its people.

Of course, we can’t forget that, at Yalta in 1945, Stalin set a precedent by demanding billions in war reparations from Germany.

Reparations issues have roiled Europe and America for a century. The Allies exacted heavy reparations from Germany because of its role in instigating WWI. Germany, however, paid only a tiny fraction of these reparations. After WWII, both Germany and Switzerland paid modest reparations to holocaust survivors. In addition, the United States paid reparations to 60,000 surviving Japanese-Americans interned in WWII. And the United States also paid Switzerland $4 million for the accidental bombing of the town of Schaffhausen during World War II.

Now everyone in the West is looking at Russia as the brutal and unprovoked aggressor. Can Russia be made to pay reparations, and if so, how?

With or without Putin, Russia is unlikely to compensate Ukraine voluntarily for the damage it has inflicted. However, if Russia desperately wants to save its economy by partially reengaging with the West, it might be coerced into paying reparations as part of the price of reintegration.

If Russia refuses to pay reparations, it will be up to Western governments, private organizations, and individuals to identify Russian assets in the West and seize them to benefit Ukraine and its citizens. According to the Wall Street Journal, only $30 billion of such assets have been seized.

The United Nations Convention against Corruption (UNCAC), approved by almost all U.N. members, including the United States, the U.K., and the E.U., provides for the seizure of ill-gotten foreign assets. The E.U., the U.K., and the United States may need to pass special enabling legislation specifying that, without a criminal conviction, their police and courts could fast-track the seizure of assets of identified Russian oligarchs and government officials. The burden of proof in any court proceedings should be on the Russian oligarch, government official, family member, or associate to prove that they acquired the asset by legitimate means. The word legitimate would have to be defined by the “reasonable person” standard as commonly used in the West.

Police and courts in the West have recent experience confiscating criminal, drug, and terrorist-related funds. Such knowledge could be used in crafting a solution to the seizure of ill-gotten Russian assets.

However, discovering a large portion of the foreign assets of President Putin, his government, and his cronies will be a lengthy and arduous task. Even with years of experience, American and European government investigators, lawyers, and accountants will find it challenging to discover Russian assets hidden in dozens of countries under layers of phony and obscure individual and corporate names.

To deal with this problem, NATO, as the key military and strategic defender of the West, should create a Special Ukraine Reparations Commission to oversee the identification of Russian assets. Such a commission could allocate responsibility for asset identification to various allied governments and private organizations. Once assets have been identified, appropriate legal proceedings should commence to seize them.

Finding offshore Russian properties and wealth will often be difficult because the Russians have tried to hide their locations and ownership. But concealing any asset inevitably leaves an evidence trail.

Hiding financial assets like currency, stocks, or gold requires the assistance of lawyers, accountants, and bankers. Secretaries, filing clerks, document processors, and others may know or have a strong suspicion about the actual owner of a hidden asset. Spouses, ex-spouses, children, relatives, and friends may be part of the conspiracy or know some key details.

The hiding of physical assets is also a complex and costly effort. It requires hiring real estate agents, architects, interior and landscape designers, or boat builders to assist in buying and improving the asset. Then bankers, lawyers, accountants, and clerks would need to hide the actual ownership by transferring the assets to a corporation or a third party. In exotic locations, travel agents, pilots, drivers, boat captains, maids, and crew may hear bits and pieces of relevant information. The buyer of an asset must typically file legal papers with appropriate government agencies in different countries. Every transaction has someone’s figurative fingerprints on the paperwork.

The United States, as the most formidable member of NATO, should take a leadership role in identifying and seizing Russian assets for the benefit of the Ukrainian people. But, to find these hidden assets, the United States and its NATO allies would also have to enlist assistance from the thousands of insiders who know who owns what. But how should the American government enlist the help of these legal, banking, clerical, or real estate insiders when we don’t even know their names?

If the reward was large enough, many insiders might cooperate with the U.S. government or private investigators. For example, insiders who provide vital information that leads to asset seizure should be awarded a generous percentage of the seized asset on a sliding scale. Perhaps, fifty percent of the value of a seized asset up to $1 million, thirty percent of a seized asset up to $10 million, etc. In addition, the seizure award should be both confidential and tax-free to increase the incentive’s value and minimize any unwanted publicity or paper trail surrounding the award.

Those courageous insiders who provided essential information that led to Russian asset seizures should also be legally immunized against the threat of prosecution for violations of confidentiality agreements or statutes. Likewise, attorneys should also be immunized from discipline or prosecution for any breach of the attorney-client privilege.

The U.S. and other Western governments should enforce the highest level of secrecy to protect the identity of the informants. Revealing their names might be a death sentence. One way to hide the insider names would be to keep the informant’s identity off all government documents, replacing actual names with elaborate codes. In addition, contact information for the informants should never be entered into any online database but would be sequestered offline in a hyper-secure location such as Fort Knox.

The President might sponsor a worldwide contest to identify Russian assets to publicize the Treasury Department’s search for those assets. There is a historical precedent and legal basis for such action. Article One, Section 8 of the United States Constitution authorizes Congress to grant Letters of Marque. During the Revolutionary War, such letters empowered American ship captains to seize British ships.

Congress could authorize President Biden to issue a limited Letter of Marque to anyone who provides evidence that leads to the seizure of a broad range of Russian assets. These assets could then be seized and used as partial payment for the enormously expensive reconstruction of Ukraine. The limited Letter of Marque would only authorize an individual to identify the asset to be seized and its location. The seizure itself would be up to the U.S. or other NATO governments.

Congress wouldn’t necessarily have to issue a Letter of Marque to seize Kremlin-related assets. Instead, it could simply authorize the President by statute to create a system of incentives. Those incentives would encourage insiders to inform the Treasury Department of hidden Russian assets and thereby become eligible for a generous portion of the asset when it was seized and sold.

The United States would not be alone in its effort to seize Russian assets. The former British deputy prime minister, Dominic Raab, said he supports using seized Russian property in the U.K. to benefit Ukrainian refugees.

As they resist the Russian invasion, Ukrainians will suffer greatly in the next few months and years. However, they would be comforted in their suffering if they knew that at least some of Russia’s ill-gotten wealth would be seized to reconstruct their country.

James S. Fay is a semi-retired California attorney, political scientist, and college administrator. His articles have appeared in social science and law journals, the Wall Street Journal, the Los Angeles Times, 19fortyfive, and Real Clear Education. In addition, he has published articles on the Helsinki Accords, presidential emergency powers, and NATO funding. He served as an intelligence officer in the U. S. Army, 3rd Armored Division.

Written By

James S. Fay is a California attorney and retired college administrator. He has a Ph.D. in Political Science from the University of Michigan. He served as a Lieutenant in the United States 3rd Armored Division and was stationed in Germany. Mr. Fay has published articles on the Helsinki Accords and on NATO funding.