Russia must foot the bill for Ukraine’s reconstruction

As Russian troops in Ukraine bogged down, Ukrainian forces began to regain territory. The Ukrainian Ministry of Defense publishes daily reports on the number of military resources lost by Russia. Three weeks after Russian President Vladimir Putin launched the invasion, the ministry said 15,600 Russian troops had been killed, the same as the Soviet Union lost in nine years of war in Afghanistan. The Ukrainians claim to have eliminated 40% of the 120 tactical groups of the Russian battalion deployed in Ukraine. The Russian military seems close to breaking point and could yet be driven out of Ukraine.

Although it is far too early to declare any victory, it is not too early to start thinking about what to do for Ukraine after the departure of Russian forces. After the two previous national mobilizations in Ukraine – the Orange Revolution in 2004 and the Euromaidan in 2014 – the momentum behind the reform quickly faded. This time the West must do more to help Ukraine cross the finish line, as Poland and others did after 1989.

Russia’s indiscriminate bombings and similar terrorist tactics have generated massive casualties. The economic adviser to Ukrainian President Volodymyr Zelensky, Oleg Ustenko, estimates that the damage caused to his country already exceeds 100 billion dollars, a reasonable figure, although it cannot yet be verified. The Institute for International Economic Studies in Vienna puts the cost of restoring the occupied Donbass region at $22 billion, and Ukrainian business claims before the Permanent Court of Arbitration in The Hague amount to around $10 billion. billions of dollars. All these demands are addressed to the Russian Federation, which should be obliged to pay reparations to Ukraine.

Fortunately, the delivery of repair payments is quite possible. The G7 countries have wisely decided to freeze the foreign exchange reserves of the Russian central bank in their jurisdictions. In total, these funds are substantial, amounting to approximately US$400 billion. They can now be confiscated – through each country’s domestic law – on the grounds that Putin is committing crimes against humanity and the crime of aggression.

Russia’s infractions are not in issue. On March 16, the highest court of the United Nations, the International Court of Justice in The Hague, decided by a vote of 13 votes against 2 (the representatives of Russia and China dissenting) that Russia will “immediately suspend the military operations it began on February 24″. ‘. And earlier this month, the UN General Assembly overwhelmingly demanded that Russia “immediately, completely and unconditionally withdraw all its military forces from the territory of Ukraine within its internationally recognized borders”. The fact that Russia is a permanent member of the UN Security Council does not give it immunity from international law. As US President Joe Biden rightly pointed out, Putin is “a war criminal”.

In response, Putin accused the United States and the European Union of failing “in their obligations to Russia” by freezing its international foreign exchange reserves. Apparently, he wants the world to believe that this “crime” is equal to his own war of aggression, with its thousands of wanton murders, crimes against humanity and war crimes.

Sticking to international law, G7 members should announce their intention to seize Russian funds and make it clear to the Kremlin that it will have to pay for everything it destroys in Ukraine. The more damage he causes, the more funds are deducted from his account balances. This money should then be deployed through the appropriate channels for the benefit of Ukraine.

To this end, the G7 can establish a Ukrainian development authority and select an oversight board to ensure good governance. The UDA should involve all relevant friendly international bodies – the EU, US, UK, Canada, International Monetary Fund, World Bank, European Bank for Reconstruction and Development, World Bank European Investment Bank and the UN. Russia and its allies must be kept out.

The UDA should have several functions, the first of which is insurance. Ukrainian public bodies, businesses and individuals will have billions of dollars in insurance claims for property that was destroyed. Rather than being outsourced to private and international insurance companies, these claims should be directed to the UDA. Otherwise, no one in Ukraine will be able to get insurance for years; the risks – and therefore the costs – would be prohibitive.

After Libyan agents planted a bomb on a plane that exploded over Lockerbie, Scotland in 1988, Libya finally agreed to pay $2.7 billion in compensation to the families of the victims. Russia’s war of aggression in Ukraine falls into the same category: it is a terrorist attack, but on a much larger scale. And with the precedent of Lockerbie, we can already judge the compensation that Russia will owe to its Ukrainian victims (or their families).

Ukraine will also need some sort of Marshall Plan for its reconstruction. Before the war, Zelensky gained popularity among Ukrainians through his efforts in road construction – a badly needed infrastructure investment program that will be even more so today. The UDA should contribute to these efforts and provide sufficient funding for highways, ports, airports, railways and other critical infrastructure.

The UDA should also be in charge of public procurement, as it is traditionally the biggest source of corruption in Ukraine. Fortunately, Ukraine has already developed an excellent electronic system, ProZorro, to improve transparency and ensure that the money is used as intended. To reinforce honest governance, all legal disputes should be submitted to international arbitration (which usually takes place in The Hague or Stockholm).

But Ukraine can only succeed if its business environment improves. Post-war international aid will therefore have to be conditioned by solid institutional reforms. The first step should be to reform the government itself so that it begins to function normally. The top priority is to establish the rule of law and strengthen property rights by reforming the judiciary, the prosecution services and the security service. Another priority is to sell the thousands of state-owned companies that breed corruption and waste, and to establish good corporate governance in the rest.

Finally, reforms and funding will be needed to support Ukraine’s social sector, from healthcare to education. Although the human costs of Putin’s war are incalculable, the economic toll is not. Whatever the total, Russia should foot the bill.

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