Putin’s Matryoshka. A War Reparations Facility for Rebuilding Ukraine

Abstract

This Article addresses a critical, trillion-dollar question: how do we pay for the reconstruction of Ukraine? The nation has been devastated by Russia’s brutal, unlawful war. Its economy is in shambles, nearing a sovereign debt default and facing rebuilding costs of at least $750 billion. The enormity of the problem cannot be overstated – and the implications extend well beyond Ukraine.

Existing proposals – many put forth by prominent scholars – largely focus on seizing Russian assets, including central bank reserves ‘frozen’ by sanctions. Such strategies, however, are legally problematic – likely well beyond the scope of Presidential authority – and financially insufficient. Meanwhile, prospective legislation raises significant constitutional considerations, may violate international law – and risks adverse implications for U.S. foreign policy, as well as the efficacy of global financial infrastructure.

Instead, this Article proposes establishing a war reparations facility for Ukraine, modeled on the United Nations Compensation Committee, which paid victims of Iraq’s unlawful invasion of Kuwait over $52 billion, funded by a levy on Iraqi oil sales. This proposal offers numerous advantages relative to alternatives. First, it bypasses the significant legal and policy challenges associated with seizure of Russian foreign reserves. Second, by leveraging the UNCC’s methodological precedent, it facilitates direct compensation to individuals harmed by the war. Finally, it provides a viable, long-term financial solution, funded by a levy on Russian oil sales.

Though hardly uncomplicated, Russian participation can be incentivized though economic leverage. Here, the Article identifies a market insight: Russian oil trades at a ‘sanctions discount,’ totaling tens of billions annually. This delta is sufficient to fund reparations for Ukraine, without changing Russia’s economic position, while its $325 billion of ‘frozen’ reserves can effectively collateralize the facility.

This Article provides an actionable solution – with immediate utility for policymakers and practitioners –while raising significant normative and prescriptive implications for reparations following future conflicts. While there is no way for Russia to truly compensate its victims, reparations may provide some modicum of justice and the means to rebuild.

It is imperative for policymakers to act with celerity to effectuate this critical support for victims of a barbaric war.