Confiscation of Russian assets: the birth of a ‘nuclear’ justice deterrent

Russian sovereign assets – how to confiscate them for Ukraine as reparations for Russian aggression – has been a central theme of the recent invasion and a continuing conundrum for allied states backing Ukraine. There is an alternative to the confiscation of those assets, and that is to turn them into a ‘nuclear’ justice deterrent. This is a theme I wrote about in ‘Rome is Burning’ published in the Solicitors Journal on 6 December 2023. The argument then was that the international justice system was not fit for purpose as it lacked a valid deterrent and the stigmatisation of criminalisation was no longer effective in today’s world, because dictators and their kleptocracies fear only threats to their money. A justice deterrent for the modern times must focus on the potential threat of bankrupting the aggressor regime. President Trump’s ‘transactional peace’ now provides a window of opportunity for the birth of this new concept within international justice.

How it could work in practice

That old idea, refreshed for today, is simple. As part of the transactional peace, the stakeholders (including Russia) along with a larger coalition of the willing (states allied to Ukraine), agree that they will form a ‘counter aggression alliance’ whereby Russian sovereign assets (and let’s not forget the larger amount of the assets belonging to the Russian war machine’s private sector) within alliance jurisdictions (including the EUR 240 billion in Europe) remain frozen to guarantee the peace. Whilst interest and revenues on these principal sums could be used for Ukrainian reparations or to leverage further loans in the interim, the principal sum would only be returned to Russia in increments for good behaviour over a set period of years (foreseeably decades) and, of course, in the event of further aggression, any remaining principal sum would be immediately confiscated to the benefit of Ukraine. There is also an opportunity to agree that judicial assessments of damages (relating to the invasion) by competent courts may be offset against the frozen principal sums. Its deterrent effect is far more effective than the concept of a stretched Europe vaguely patrolling a challenging no-man’s land or American miners being on Ukrainian soil digging for rare earth elements. A ‘nuclear’ justice deterrent of losing over EUR 240 billion is placed on any Russian future aggression. Peace is incentivised, so Russia would want to behave to claw back such sums as quickly as possible over time.

However, the opportunity must not be lost for a broader concept to be adopted beyond Russia–Ukraine, and for building a broader coalition for peace. Trump and Putin are insistent that Ukraine’s NATO membership is a non-starter; NATO’s nuclear deterrent against acts of Russian aggression seems currently (and for some time) off the table. But that does not preclude a ‘nuclear justice’ deterrent. A consensus of the willing – all stakeholders in the transactional peace – could, as part of it, agree to form (say) CATO – a Counter Aggression Treaty Organisation – that provides member states with a justice deterrent through members agreeing to two things in circumstances where an act of aggression occurs and is then proven: Firstly, upon any (by a non-member or a member of CATO) act of aggression against any CATO member, the aggressors sovereign assets within a members jurisdiction are frozen. Secondly, upon appropriate judicial determination of the act of aggression, frozen CATO assets may be ‘confiscated’ for reparations to victim CATO members. If you were a peace-loving country with no aspirations for expansion, why would you not join such an alliance?

The wider impact

Let’s face it: this does not deter sovereign investments overseas; it only deters it for those with a foreign policy based on aggression. Most autocratic investors have no intention of committing acts of aggression, let alone upon CATO members. In itself, it deters aggression by would-be aggressors, and punishes states with aggressive foreign polices by effectively cutting them out of overseas investment markets until such time as they have shelved their aggressive foreign policy ambitions.

This approach also creates an opportunity to attract a broader coalition of the willing into the transactional peace process as guarantors through their dual desire to join CATO. One might imagine many peace-loving prosperous or small states – incapable of defending themselves against committed aggression, which may reside in regions dominated by a bully dominant state – wishing to join CATO.

If President Trump is about an America stepping back as the world policeman and is truly transactional, then his actions naturally lead to the development of a CATO. It is perhaps the natural child of his overseas pillow talk. It is perhaps his legacy, indeed peace prize material. It enables the US to stand back, focus on America, not pay for peace overseas, and yet provides the world with a nuclear justice deterrent against aggression, without making US commitments to bombs and troops on the ground.