Contact Us

Trump Can Make Russia Pay to Rebuild Ukraine

Trump Can Make Russia Pay to Rebuild Ukraine
Thought Leader: Niall Ferguson
January 16, 2025
Written by: Niall Ferguson and Chris Miller

The West has frozen $300 billion of Moscow’s assets, but Europe has stood in the way of using them.

The key to securing Europe at less cost to U.S. taxpayers may be sitting in European bank accounts. The West has frozen around $300 billion of Russian foreign-exchange assets, but European obstinacy has prevented these funds from being used to compensate Ukraine for war damages. President-elect Trump should insist that the Kremlin’s reserves be mobilized to fund Ukraine’s reconstruction and future arms purchases.

Russia has caused more than $150 billion in direct damage to Ukraine and nearly $500 billion in economic losses, according to the World Bank. Ukraine will need external funds of this magnitude to rebuild, and more in the meantime to rearm itself with continued purchases of Western weapons.

Mr. Trump doesn’t want the U.S. to foot this bill, especially with America’s military already spread thin in the Middle East and Asia. European budgeters are planning to increase their own defense spending, as Mr. Trump demands, so they’ll be stretched thin as well. The obvious solution is to use the frozen Russian assets.

The Group of Seven has already agreed to tap the profits from interest produced by the frozen assets. But because of European opposition, aided and abetted by the inept diplomacy of the Biden administration, tapping these profits unlocked only a $50 billion loan for Ukraine and left the underlying assets untouched. This isn’t enough.

Five factors make now the ideal time to use these funds to compensate Russia’s victims.

The first is Mr. Trump’s return to the White House. President Biden always accepted the lowest common denominator among allies, letting foot-dragging leaders such as Germany’s Olaf Scholz offer speeches rather than substance. Mr. Trump knows how to exert leverage—and Europeans know that if they don’t act, he’ll turn the screws.

Second, the assets have changed. When the war started, most Russian reserves were in the form of foreign-government securities held by European custodians. Now, according to the Hoover Institution’s Philip Zelikow, the securities have largely matured into cash. Up to a third may be held in dollars or British pounds—potentially giving Washington and London the ability to act unilaterally.

Third, it’s clear that the reserves can be mobilized in ways consistent with international law. Ukraine is owed reparations from Russia. Lee Buchheit, an expert in sovereign-assets law, proposed in 2023 that Western countries could lend to Ukraine cash secured by Kyiv’s right to receive these reparations. Assuming Russia refuses to pay, the West could set off the foreign reserves against this obligation.

Alternatively, Mr. Zelikow proposes moving the assets to a trust fund to compensate Ukraine for war damages, the same way that Saddam Hussein’s foreign reserves were used to rebuild Kuwait after the Gulf War. Allied powers did something similar after the world wars, using German assets to pay for reparations. The European excuse that international law prohibits moving on the reserves no longer holds water.

Fourth, Russia has less ability to retaliate economically. Any assets that Western firms still own in Russia are increasingly beyond their control. Income is difficult or impossible to repatriate. The Kremlin is already using strong-arm measures against these firms, and in most cases, they have already written down their value. Moscow can’t do much more damage than it already has.

Fifth, many European governments are finally warming to the idea. Europeans realize that Ukraine needs a long-term source of funds, and change is coming in the most important country, Germany. Mr. Scholz will likely be replaced in February by Friedrich Merz, who has rightly criticized Mr. Scholz’s bare-minimum support for Ukraine. Mr. Merz has yet to take a stand on the foreign-assets question, but mobilizing Russia’s reserves would fit with his vision—and his need to address Mr. Trump’s insistence that Europe contribute more to its own security.

The Trump administration has a unique opportunity to strike a better deal. Both sides of the Atlantic would benefit from transferring Mr. Putin’s cash to the victims of his aggression—the sooner, the better.

Sir Niall Ferguson is a senior fellow at the Hoover Institution and author of “Doom: The Politics of Catastrophe.” Mr. Chris Miller is a professor of international history at Tufts University and nonresident senior fellow at the American Enterprise Institute.

Relevant posts

Subscribe to the WWSG newsletter.

Check Availability

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

0
Speaker List
Share My List