Ukraine hopes to tap frozen Russian state funds to pay for reconstruction, says minister

Ukraine is working with a group of international lawyers on a mechanism to use frozen Russian funds to compensate for its losses suffered as a result of Moscow’s invasion, Justice Minister Denys Malyuska told Reuters on Thursday.

Officials say the invasion, which Russia calls a “special military operation”, has so far damaged up to 30% of all infrastructure to varying degrees. They put the total cost of all the damage so far at about US$500 billion.

The European Union has been seeking to create an international fund for reconstruction, while some EU politicians have called for using Russian assets frozen by the West, including US$300 billion in Russian central bank reserves.

“We have chosen the most important goal for ourselves – the money of the Central Bank and the Welfare Fund of the Russian Federation,” Malyuska said in an interview in Kyiv.

“They are in one place, have one owner, and this owner is definitely committing illegal criminal acts,” he said, referring to the Russian state, adding that it had “a significant amount of money”.

Judging by an analysis of officially published data of the Russian central bank, the funds in question amount to up to US$500 billion. “We know where to look for it,” he added.

Malyuska said some of the funds were held in the US, with the rest in Britain and in various EU countries.

The Kremlin did not immediately respond to a Reuters request for comment. There was also no immediate reaction from the US or Britain to the Ukrainian proposal.

‘Political will’

Malyuska said the legal teams investigating the matter believe the quickest solution would be for countries to pass their own special national laws to allow the frozen Russian funds to be used for Ukraine’s needs.

“It requires a certain level of courage and political will from each country,” he said.

Ukraine also proposes that leading Western powers sign up to an international agreement to coordinate the compensation mechanisms, thereby ensuring that decisions are made not by individual countries but by consensus, he said.

“There is a great political interest in this. Every Western country realises that it looks rather strange when it helps Ukraine with its taxpayers’ money, despite the fact that it holds the money of the Russian Federation,” Malyuska said.

Malyuska said targeting Russian state funds did not mean that Ukraine would abandon plans to tap the frozen cash of Russian oligarchs and members of President Vladimir Putin’s inner circle.

Thousands of people have died, many cities and towns badly damaged and some 11 million people – about a quarter of Ukraine’s total population – displaced since Russia launched its invasion on Feb 24.

Russia says its military operation aims to demilitarise and “denazify” Ukraine. Kyiv and its Western allies reject this as a pretext to wage an illegal war of aggression.