Making Russia pay, at last

Making Russia pay, at last
By Jorge Liboreiro



From the early days of the war in Ukraine, Western allies closed ranks to provide Kyiv with the military and financial support it urgently needed to resist the advance of the invading Russian troops and, ideally, push them back to where they were before February 2022.


In parallel to these efforts, democratic nations began looking for ways to ensure the Kremlin was held accountable for the destruction it was wreaking. The search initially focused on justice: ideas were floated about setting an ad-hoc international tribunal to try those accused of war crimes. The plans made headlines but gradually lost momentum, as officials realised having Russian commanders take the stand wasn’t going to happen any time soon (or ever).


Allies then turned into other projects that, albeit logistically complex, appeared to have greater chances of succeeding. If Russia wasn’t going to be judged for the damages it has caused, could it at least be forced to compensate them? That’s when the motto “Make Russia Pay” emerged and became a rallying cry from Brussels to Washington.


The West had frozen almost $300 billion in frozen reserves of Russia’s Central Bank but didn’t know exactly what to do with them. Confiscating sovereign assets is illegal under international law and can set a dangerous precedent vis-a-vis investors. Even the European Central Bank raised the alarm about unwanted consequences for the euro’s credibility. (Most of the assets are in Belgium.)


The EU was mindful of these concerns and spent long months exploring and debating ways to use the Russian frozen assets. The deal arrived in May and allowed the bloc to capture the windfall profits that the assets were generating. The first transfer of €1.5 billion was made in July, with a second tranche expected in March 2025.


But Russia’s relentless bombing of Ukraine’s energy systems and military advances in the east changed the equation. Something else had to be done. Bigger and faster.


The G7 then came up with a new plan: to issue a $50 billion (€45 billion) loan for Ukraine and use the windfall profits of the Russian assets to cover the repayments. It was a ground-breaking initiative that required intense back-and-forth between Brussels and Washington, with a Hungarian veto in between.


At last, the agreement was sealed this week.


“Ukraine can receive the assistance it needs now, without burdening taxpayers,” said US President Joe Biden. “Our efforts make it clear: tyrants will be responsible for the damages they cause.”


It is, without a doubt, an audacious move that only the pressure of wartime could have conceived. By tapping into the $3 billion of profits the assets generate every year, allies secure a twofold goal. First, neither the West nor Kyiv will pay for the loan. Second, Russia will.


Brussels notches an additional win: after some hesitation, the White House committed to providing $20 billion, which means the EU will be able to decrease its contribution and match America’s share. Both sides of the Atlantic will be equal parts, with the UK, Canada and Japan putting up the rest.


Although the Kremlin would have been deprived of the profits with or without the loan, the bold scheme represents the most tangible result yet of the “Make Russia Pay” motto because it establishes a link between Moscow’s public coffers and Ukraine’s reconstruction. Until now, the West’s strategy has been support for Ukraine, on the one hand, and sanctions on Russia, on the other, without a direct connection. The loan merges both paths into one.


“It’s money that will support the Ukrainian state while it fights for survival,” said Ursula von der Leyen. “And it’s money from Russia’s frozen assets, used to pay for the chaos it caused. As it should.”


Kyiv celebrated the breakthrough, which comes as the country prepares for what is expected to be a gruelling winter. Crucially, the G7 loan will be undesignated, meaning Ukraine will be allowed to spend it to purchase ammunition, repair power plants, finance public services or any other needs it considers a priority. The European Commission estimates disbursements could start in early 2025.


“This is something that will really support us,” said President Volodymyr Zelenskyy. “I thank the entire Group of Seven.”


In his video message, the Ukrainian leader sported a brand-new t-shirt with a brand-new motto: “Make Russia Small Again.”