The West will not be transferring frozen Russian assets worth $300 billion to Ukraine

The West is currently not ready to transfer the frozen reserves of the Russian Central Bank to Kyiv due to doubts about the legality of such a procedure. An alternative could be the issuance of “reparations bonds” by Ukraine, as reported by Reuters.

These bonds would be sold by Ukraine and would yield profits only if the country receives reparations from Russia for war-related damages. The interest payments on these bonds could be increased and would be contingent on Kyiv receiving compensation. Holders of these bonds would not have contractual rights to the frozen Kremlin reserves. However, as Russia is unlikely to willingly make payments, these frozen assets could become the primary source of funds for compensating Ukraine.

The interest accrued on these reserves could be utilized to cover both the principal amount of the bonds and the interest payments. Importantly, this approach differs from outright confiscation, as the assets would only be transferred if a legal process determines Ukraine’s entitlement to compensation for the damages. This strategy would provide Ukraine with a practical means to secure compensation, potentially amounting to $300 billion. The success of this approach would depend on the willingness of the United States, the EU and other allies to purchase these securities.