Does the U.S. have the legal means to use Russia's frozen assets to finance Ukraine's reconstruction?

Question

https://www.france24.com/en/live-news/20220909-ukraine-reconstruction-to-cost-349-bn-report

Rebuilding Ukraine following the devastation caused by the Russian invasion will cost an estimated $349 billion, according to a report issued Friday.

But the figure, which totals 1.5 times the size of the Ukrainian economy, is considered a minimum and is expected to grow in the coming months as the war continues, according to the joint assessment by the government of Ukraine, the European Commission, and the World Bank.

It has been reported that it would cost 349 billion to reconstruct Ukraine as it was before. I heard that the U.S. possess around 300 billion in frozen Russian asset, and I was wondering if the U.S. had the legal means to use that fund "illegally" and use it to finance the reconstruction of Ukraine? Is there a legal precedent for doing something similar?

Answer 1

Legal from what perspective?

International law consists of the assumption that states are sovereign, and negotiated or customary rules between them. Just which customary rules are established enough to be jus cogens, binding on all states, is not finally clear. The ability of one state to deposit money in another state and get it back is not guaranteed. On the other hand, historically theft on this scale might have been a casus belli.

But simply taking that money would be a grave breach of trust into the financial services of a country, unless most or all other nations agree that it is a very special case. Russia is arguing internationally that Western sanction policies are a threat to the rest of the world. The Western filter bubble tends to dismiss it as propaganda, but it has some succes in the rest of the world.

If the US takes Russian money, would China, Saudi Arabia, India, Brazil trust American banks? And if they don't trust them, can they find an alternative?

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Follow-up: as you can see from the comments which have since been removed, some readers seem to think that I share the Russian position. I do not. But I do believe that (too) much of the rest of the world shares it, and that the West needs to be careful not to play into Russian narratives. Global support for sanctions is not automatic, it takes effort to maintain it.

Answer 2

Apparently a precedent for doing so (i.e. unlocking frozen Russian assets to use in the rebuilding of Ukraine) exists legally somewhere in the Iraqi 1990 invasion of Kuwait, according to Philip Zelikow at the University of Virginia. But I'm curious as to why it must be "the U.S." that facilitates this process. What, are they ("we" actually, as I'm American) bigger than the international community writ large? And isn't the knee-jerk assumption that this is purely the U.S.'s prerogative just a reflection of the sort of rigid mindset that Russia (and, increasingly, the Global South led by China) is lashing out at in the first place? https://www.lawfareblog.com/legal-approach-transfer-russian-assets-rebuild-ukraine

Answer 3

Yes.

The only potential hurdle to it would be sovereign immunity. But sovereign immunity can be removed with a legislation. There are already laws which remove sovereign immunity to civil law suits.

The criteria for sovereign immunity are established in Foreign Sovereign Immunities Act. But the act can be amended to allow more situations in which law suits can occur. For example, JASTA amends it to:

authorize federal courts to exercise subject matter jurisdiction over any foreign state's support for acts of international terrorism against a U.S. national or property regardless of whether such state is designated as a state sponsor of terrorism.

Other amendments can be passed to create exceptions to allow law suits under some other sets of limited circumstances.

Answer 4

The context matters.

If to ask "can and would USA just nationalize arbitrary foreign accounts for no reasons", the answer is likely no and all talks about "undermined trust" are relevant. But there is more than that in the context.

If I launch a rocket from my yard and destroy a house of my neighbor, it cannot be there is absolutely no legal basis to ask me to pay for rebuild. Even if I start to argue the launch was "somewhat provoked". Of course it must be a law court, the judges will decide, Russia will have the word to say, but I do not see how they can come up dry out of this swamp. Other answers contain references to the possible legal approaches.

It is the same as with economic sanctions, with visas, with closing the airspace. These all may have questionable legality if done for a random country without any visible reason.

There is a reason. I do not think there is any country outside your "filter bubble" that thinks it is Ukraine that invaded Russia or that comparable part of Russian civil infrastructure has been destroyed.

USA and EU may not be able to provide hundreds of billions required to repair the damage done for Ukraine. Leaving the country "as is" means creating a large unstable region with very unpredictable future. It may be no other way as to use this money.