The plan to make Russia pay for Ukraine's weapons

As Ukraine’s soldiers struggle on the front lines, waiting for the US Congress to approve $US60 billion ($93 billion) worth of aid, a creative solution to the country’s ammunition and weapon shortages could be on the horizon.

A plan is reportedly circulating among G7 nations that could see around $US300 billion worth of Russian assets currently frozen in the West, seized and handed over to Ukraine.

In other words, making the Kremlin pay for the ammunition that Ukraine needs and then having it fired back on its occupying forces with interest.

It’s an idea that British-American financier and human rights activist Bill Browder has been pushing for two years. He sees it as a solution to the hold-ups in unlocking aid in the US and the European Union.

“There’s a real problem right now in Ukraine, which is that they’re running out of money, running out of ammunition. Many more Ukrainians are dying on the front line, and they need more money to defend themselves,” says Mr Browder.

“Historically, the United States and the EU have provided weapons and money. But now we’re seeing a slowdown of that money.

“And so, the elegant solution is for the West to confiscate that money and contribute it to the defence of Ukraine. And then that overrides all sorts of, infighting and politics.”

The Russian money Mr Browder wants to confiscate is kept in the form of cash or bonds held in banks in Western countries.

“The Russian state has invaded Ukraine. The Russian state created the damages. The Russian state has property that we have custody over. We can confiscate that,” he told the ABC from his London office.

The 59-year-old is well known to Western politicians around the world as the head of the Global Magnitsky Justice Campaign and as one of Vladimir Putin’s fiercest foes.

Up until 2005, he was the largest foreign investor in Russia, before being banned from entering the country after he exposed the flow of dirty money to bureaucrats and cronies inside the Russian president’s regime.

In 2009, his lawyer Sergei Magnitsky was killed in prison. He’d been arrested after he uncovered a state-sponsored fraud that saw not only Browder’s companies stolen, but $US230 million in taxes they had paid to the government.

Following the death of his lawyer, Mr Browder has travelled the globe, lobbying politicians to bring in Magnitsky acts named in his friend’s honour.

The acts punish human rights abusers through visa bans and the freezing of assets, preventing them from investing in safe havens.

The first Magnitsky Act was passed in the US in 2012 after Mr Browder convinced Republican senator John McCain and Democrat senator Ben Cardin to co-sponsor a bill. Similar acts followed in countries like Australia, the UK and Canada.

Now Mr Browder is travelling the world trying to convince politicians that seizing frozen Russian assets is the next important move while the war continues.

“When I first started, everybody laughed at me,” he says.

“They said, this is a complete non-starter. Totally unorthodox. It’s never going to go anywhere.”

Last month a US Senate Committee approved legislation that helps set the stage for confiscating Russian assets.

Mr Browder now believes there is momentum for it to happen, but he’s desperate for a result before the US presidential election.

“At the moment, Trump is very competitive. He could easily win,” Mr Browder says.

“The seizure of the assets and seizure of Russian central bank reserves needs to be done before the November 2024 elections, because certainly, Trump is not going to get involved in that.”

Could seizing Russian assets lead to financial instability?

Even if the US passes relevant legislation, much of the estimated $US300 billion in Russian assets resides in European banks, not American ones.

An estimated $US205 billion is held in Euroclear — a securities depository based in Belgium.

The President of the European Commission Ursula von der Leyen says that EU finance ministers are working on a proposal that would allow Ukraine to access the money.

But there is nervousness amongst certain European nations that such a move could lead to a backlash from Russia and cause financial instability.

As Credit Suisse strategist Alexander Kolyandr put it: “They fear that doing so would deter sovereign wealth funds, central banks, corporations, and private investors from the Global South from investing in European assets.”

Last month Belgian Finance Minister Vincent Van Petegham said that seizing assets “cannot impact the financial stability of systemic institutions such as Euroclear,” while expressing concerns about potential legal action from Russia.

This week, the EU Council adopted a decision that could see profits generated from frozen Russian assets in European banks passed on to Ukraine, but stopped short of paving the way for confiscating all of its central bank reserves held on the continent.

Doug Bandow is a senior fellow with the US libertarian think tank, the Cato Institute. He’s been critical of US funding of the defence of Ukraine and has told the ABC that the idea of seizing Russian assets could backfire.

“Well, the temptation is obvious. You want to punish the evil doer,” he said.

“If you believe in the rule of law, you have to have legal justification. You can’t just start grabbing assets and deciding, ‘I don’t like this country or that country’. Western nations are not at war with Russia.

“It really should matter to those countries if they promote the rule of law. Because when you start slashing away at that … well, what’s to stop that from being used against them?”

Mr Browder doesn’t see any legal inconsistency in seizing Russian assets.

“This is not just arbitrary. This is in reaction to a massive, illegal and murderous destructive invasion of a neighbouring country violating all international law.

“I don’t think that it in any way goes against the rule-based international order. We can’t be straight-jacketed by some rules that just make it illogical if Putin has done something truly terrible.

“The rules-based international order says that countries that do terrible things should pay reparations.”

Mr Bandow says any move to seize assets could have unintended consequences that could end up harming Western nations.

“Imagine if countries decided that they should do something about assets of countries that had unlawfully invaded Iraq and ended up promoting a sectarian conflict there,” he says.

“One could imagine them coming after the United States, the United Kingdom and perhaps even Australia and saying you all were supportive, you were involved in this misadventure. We were against it. We were proved right. We’re going to keep your money.”

Russian state media has reported that Kremlin spokesperson Dmitry Peskov has said if any of its sovereign assets are seized, it will be challenged in the courts.

“If such decisions are made, they will be deeply illegal,” he said.

“They will have very, very long judicial prospects for both those who make and those who implement these decisions.

“We will defend our interests and illegally seized assets.”

Mr Browder has contempt for the argument being mounted by the Kremlin and says Western nations can make reasonable laws that make asset seizures legal.

“Putin has grossly violated international law. He can’t be sitting back and saying I should be protected by international law.

“We have governments and parliaments that can look at this issue and say, okay, if you have two laws that are in conflict, which law should prevail?

“You can actually put legislation in place to say that in this particular instance, the law on countermeasures should prevail and therefore the money is not protected by sovereign immunity and therefore it could be confiscated.”