Several days after Russia’s full-scale invasion of Ukraine in 2022, a coalition of states, including all G7 economies, froze approximately US$350 billion in Russian foreign currency reserves. Since then, the ultimate disposal of this money has been contentious. The question is whether these funds should be transferred to Ukraine as reparations for Russia’s illegal war and, if so, what the implications of such a step would be. As nations around the world continue to debate the issue, one capital has studiously kept quiet: Canberra.
The international ramifications of any resolution to this question can hardly be overstated. Decisions taken today determine the parameters of what future responses to wars of aggression may look like – or, indeed, should look like. As for Ukraine specifically, providing US$350 billion for the bolstering of its defence and rebuilding of its infrastructure would not just make a difference: it would dwarf the amounts Ukraine has received from its allies so far, totalling US$30 billion in US military assistance over the lifetime of the Biden administration and €50 billion in the EU’s latest assistance package to Ukraine.
The practical relevance of these hundreds of billions of dollars is also much greater than that of any yachts, villas or private jets.
The debate over the fate of Russia’s frozen funds has followed a complicated trajectory. In the first several months of the full-scale war, much of US, EU and UK rhetoric focused on confiscating oligarch properties and repurposing them for Ukraine’s needs. The imagery of seizing yachts and throwing mansions open to Ukrainian refugees was conjured up. This was a promise that was impossible to deliver on because it would entail confiscating private property that, in most cases, could not be provably traced to any crime. (The one exception being the assets of those impatient oligarchs who tried to unlawfully move their sanctioned property and, in doing so, made it liable to confiscation.)
With time, frozen foreign currency reserves belonging to the Central Bank of Russia came squarely into focus. Unlike oligarch wealth, this is the property of Russia itself, whose obligation to pay reparations to Ukraine is uncontroversial and recognised by the UN General Assembly. The practical relevance of these hundreds of billions of dollars is also much greater than that of any yachts, villas or private jets.
There followed a protracted – and ongoing – discussion about what international law requires. Sovereign immunities generally protect state property from seizure, but the law of state responsibility allows for countermeasures: proportionate measures against a state in breach of international law designed to bring it back to compliance. So, faced with Russia’s continuing aggression, the transfer of its frozen assets to Ukraine could be precisely such a countermeasure.
Still, the sheer practical novelty of seizing hundreds of billions in central bank property to provide financial relief to a nation under assault gives pause to governments. What precedent would that set? One view is that would-be aggressors need to know that the collective West will not remain a safe haven for their wealth while condemning the aggression. The other school of thought holds that mixing politics with finance will spook the rest of the world and prompt Global South countries to shift their holdings elsewhere – precisely where is not often made clear.
Australia is curiously positioned in relation to this discussion. Its prosperity and security rely on peace and the international rule of law, especially in the Asia-Pacific. How vigorously the world responds to wars of aggression is a matter of direct practical relevance. On the other hand, because its own economic exposure to Russia is modest, Australia does not have financial skin in the game and is less susceptible to lobbying by the risk-averse banking executives.
If one were to ask what the Australian position is, there is no answer. There is simply no indication of what the government thinks on the subject.
And yet, if one were to ask what the Australian position is, there is no answer. There is simply no indication of what the government thinks on the subject. This reluctance to engage with a key issue is surprising given Australia’s strong bipartisan support of Ukraine. It persists despite an open letter signed by two former prime ministers. An ongoing Senate inquiry into sanctions may shed some light on the matter, but it has a great deal of other ground to cover.
The Australian silence is unusual. In the United States, one can observe an evolution from Treasury Secretary Yellen’s early non-committal statements towards her advocacy for the transfer of Russian assets. Canada has also been a leading proponent. Even the European Union, structurally doomed to be as timid as its most reluctant member state, has approved handing over some of the interest generated on frozen Russian assets to Ukraine, while discussions about the rest are afoot. It remains to be seen what position Keir Starmer’s government takes in the United Kingdom, but notably it is a Labour MP – Sir Chris Bryant – who unsuccessfully proposed relevant legislation under the previous administration.
One can understand the diplomatic instinct to keep one’s own counsel. But, as a state with strong rule of law credentials and exceptional international law expertise within its public service, Australia has the benefit of being taken seriously on issues such as this. It is time to use this advantage.
