Everyone around the world now knows of the destruction and damage caused by Russian forces in Ukraine. Ukrainians have fittingly provided a constant stream of war crimes, missile attacks and human rights violations committed by the aggressor, the Russian Federation and its billionaire oligarchs.
Everything destroyed must be rebuilt and the cost of rebuilding shattered homes and infrastructure will be an immense financial burden that must be borne by someone. Thanks to blatant disregard for international law and human rights shamefully displayed on platforms like Facebook, Instagram and Telegram, the case against Russia seems a lock. However, an International Court of Justice ruling could take years or even decades, and Ukraine certainly can’t wait that long for resurrection. To restore Ukraine to some form of pre-war normalcy, the process must begin now, and that means money and lots of it. Indeed,
For appropriate reparations and rebuilding to be successful there are many moving parts that need to be coordinated.
Where does the money come from?
Ideally, the ill-gotten gains of the Russian Federation’s super-rich oligarchs can be liquidated and transformed into funding. However, as I noted last time (INSERT PART 3 LINK), this process is complicated and fraught with delays. Fortunately, there are some creative ways which could provide immediate funding while a case for reparations makes its way through the courts.
The first steps have already been taken by the UN recently adopting a resolution calling for Russia to pay reparations for damage inflicted on Ukraine. While this resolution is not binding, it’s a strong rebuke to any aggressor showing that if you invade another sovereign nation, you will be made to pay.
Social Bonds to the rescue
Former U.S. Ambassador-at-large for War Crimes, David Scheffer has proposed an innovative solution involving private money to support humanitarian efforts through investing in a Social Bond.
“Social bonds recently became exceptionally important particularly in Europe, to stave off the enormous economic impact of the COVID-19 pandemic.
A Social bond requires a reputable institution to issue the bond to raise funding for health care, environmental, or humanitarian priorities, and to collateralize the bond either with assets or backed by the guarantee of one or more Category A (AAA, AA, or A) sovereign credit nations.
The social bond could be structured for maximum immediate impact with a substantial reservoir of funds to invest in large scale housing reconstruction. This would be viewed as a major factor in restoring the nation’s economic stability, habitability and growth, and thus attract sovereign participation in a guaranteed instrument for positive social outcomes.”
A consortium of international investment banks could issue social bonds corresponding to the amount of seized foreign currency reserves of the Russian Federation held in western banks. There is reputed to be $300 billion or more in Russian foreign currency reserves frozen in central banks round the world. So, if a social bond worth $300 billion were issued to support the reconstruction of Ukraine, Western governments holding the frozen Russian currency could guarantee the bond in proportion to the amount of reserves they hold. Canada for example, could guarantee $16 billion worth because it has already frozen $16 billion of Russian reserves.
A Social bond with a 30-year term would give plenty of time for Ukraine to make their case to the ICOJ and win a judgement against the Russian Federation. Once the ICOJ rules in Ukraine’s favour, countries like Canada simply pass the Russian funds to the private investors who provided the much needed immediate cash infusion for the rebuilding of Ukraine.
Seize the day
A long-term social bond would also give countries time to determine how to navigate international law and seize the Russian reserves in advance of an ICOJ ruling. Special legislation like Canadian Senator Ratna Omidvar’s Special Economic Sanctions amendmenthas provided a mechanism to liquidate sanctioned assets of an aggressor. Using Russian money to pay restitution is undoubtedly the preferred solution for western taxpayers feeling the fatigue of footing the bill for the defence of Ukraine.