Ukraine wants reparations. Already.
The Russian military has inflicted at least $1 trillion in damage to the country’s infrastructure and other physical assets since the onset of hostilities, Oleg Ustenko, an advisor to Volodymyr Zelenskiy, told Bloomberg on Monday.
Ustenko wants that paid back, and Ukraine has some very specific ideas about how to go about getting it. According to Ustenko, the Zelenskiy government is negotiating with “allied countries” (which is pretty much every major country not called Russia or China) on what he described as a “mass attack on all major assets.”
The idea is to commandeer some $1.5 trillion belonging to Russian government officials and businesspeople, including the country’s oil tanker fleet. According to Clarksons, “the most authoritative provider of intelligence for global shipping,” Russia is the proud owner of Earth’s biggest collection of Aframax tankers, held through state-owned Sovcomflot. Those are the kinds of assets Ukraine wants tracked down and seized, apparently.
The tankers are only worth around $5 billion, though. And I imagine chasing them down and auctioning them off won’t be anyone’s idea of simple. Fortunately, there are hundreds of billions in hidden assets “all over the world,” which Ustenko reckoned can be located and “arrested.”
The US and its allies have already frozen some $300 billion of Russia’s hard currency reserves, and Janet Yellen has discussed ways of preventing Moscow from using its gold to transact. Further, Yellen last week forced Russia to make ruble-denominated payments on dollar bonds, in violation of the securities’ terms. Swaps subsequently priced default as a near certainty and S&P pulled coverage. “Although the default could be remedied under a 30-day grace period allowed under the terms and conditions of the bonds, we don’t expect that investors will be able to convert those ruble payments into dollars equivalent to the originally due amounts, or that the government will convert those payments within that grace period,” the ratings agency wrote.
Finance minister Anton Siluanov said Russia won’t attempt to issue local or hard currency debt in 2022. “The borrowing cost would be cosmic,” he told Izvestia. Siluanov also threatened legal action. “Of course we will sue,” he said. “We have taken all the necessary steps to ensure that investors receive their payments.”
He admitted such proceedings would be an uphill battle — much like the war that cost Russia its sovereign ratings (all three majors have withdrawn), half its reserves and, most importantly, thousands of lives.
If Moscow is ready to sue over a forced bond default, one imagines the Kremlin will be feeling especially litigious in the event the West “arrests” government assets around the world and auctions them off to pay for the reconstruction of Ukraine.
I suppose if the conflict drags on, any funds raised could also be used to pay for weapons. “We now [have] to decide what’s more important, sanctions or weapons,” Luxembourg’s foreign minister, Jean Asselborn, said Monday. “My conclusion is that it’s now weapons,” he added, noting that “if you had told me this two months ago, I would have said, ‘Are you crazy?'”
I’d be remiss not to note, in closing, that war reparations have a checkered history.
Seems like Finland and Sweden may soon be in the market for additional weapons, too.