For some Canadians, nothing symbolizes foreign-policy inaction more than flying into Toronto’s Pearson Airport and seeing the world’s heaviest cargo aircraft, the Antonov AN-124, parked on the tarmac. That’s where the bloated jet has stood since early 2022, when Russian assets in Canada were frozen.
If we’re spending billions on arms and supplies to help Ukraine resist its invasion by Vladimir Putin, a number of outspoken parliamentarians and some experts argue, why don’t we instead just give Kyiv all the Russian stuff we’ve frozen, including that airplane and, more significantly, the possibly US$16-billion Canadian-controlled share of the US$300-billion state assets the West has frozen? Rather than simply denying Moscow access to them, why not spend those funds on arming or rebuilding Ukraine?
In fact, Canada has had the power to hand over that airplane and other private oligarch assets since June of 2022. But the almost half-trillion in government funds, most of them frozen in a Belgian clearing house, are not so simple. In June, the Group of Seven countries compromised by agreeing to use the interest accumulated on those assets (US$5.5-billion so far, plus about US$3.3-billion more a year at current rates) to finance the Ukrainian war effort – essentially turning the seized state assets into an endowment fund – and as collateral to borrow tens of billions in immediate Ukraine aid, to be repaid using the future interest.
But that only covers a slice of Ukraine’s self-defence costs, estimated at more than US$40-billion a year in arms alone, plus massive economic losses and reconstruction costs. If the United States or a major European state were to stop contributing, then Ukraine, and by extension the democratic world, would be in serious trouble.
That’s why there’s been momentum toward seizing the assets outright. In April, the United States passed the REPO (Rebuilding Economic Prosperity and Opportunity for Ukrainians) Act, which permits the President to seize and redirect the U.S. share of those state assets.
In Canada, a similar piece of legislation, Bill S-278, was launched last year by independent Senator Ratna Omidvar; it’s likely to reach the House of Commons in September. The Trudeau government expressed guarded support for the idea in its April budget statement, but made it clear that it wants to act in concert with the Group of Seven, whose European members are skeptical of the idea. Some parliamentarians and activists prefer a unilateral seizure.
But there are genuine reasons to be hesitant about the idea, and to avoid using it unless things become dire.
One concern is that a seizure of a foreign country’s government assets – by countries that are not at war – would wreak havoc on Western economies as other less-developed countries withdrew their assets, clearing-house institutions failed and had to be bailed out by the EU, possibly at greater cost than the value of the assets. European Central Bank president Christine Lagarde warned recently that “moving from freezing the assets, to confiscating them, to disposing of them [risks] breaking the international order that you want to protect, that you would want Russia to respect.”
More serious, and less discussed, is that those assets can only be seized once, after which we lose the powerful negotiating tool of unfreezing them. This is not a minor issue: The only likely way the invasion of Ukraine will end is when Vladimir Putin ceases to be Russia’s leader; at that point, economic leverage becomes a potent tool again.
The promise of unfreezing assets and returning a country to economic normality is the most powerful instrument we possess for changing the behaviour of a rogue country. It was used most successfully a decade ago as the centrepiece of the Joint Comprehensive Plan of Action, popularly known as the Iran nuclear deal, in which the Islamic regime abandoned its nuclear-arms ambitions in exchange for agreeing to constant international inspections and the unfreezing of assets – and the leverage worked (until then-president Donald Trump reneged on the deal).
A “JCPOA for Russia” is likely to be the best lever for restoring Ukraine to its legal borders. As others have pointed out, the frozen assets are also collateral to force Russia to pay for Ukraine’s reconstruction. Without this money, a post-withdrawal sustainable peace will be harder to attain.
For now, the frozen assets are better used as an endowment. However, Canada should retain the power to seize them, for one big reason: If the Nov. 5 U.S. election produces a Trump victory, Ukraine will lose half its support. It will be hard to make up the difference, especially since Germany, Europe’s largest contributor, can’t raise its contribution because of a 2009 constitutional amendment that strictly limits borrowing.
If Washington goes dark again, the usual rules will fall by the wayside and we will need everything we have to keep Ukraine in the fight – including Moscow’s parked money. We’d better be prepared.