Stalling by the European Central Bank (ECB) and some European treasury departments, which have starved Ukraine of the resources to win, might now result in Ukraine’s defeat.
Combined with a cutoff or slowdown in US aid, this could result in catastrophic consequences for the European political economy and confidence in the euro. Think of multiple millions of millions of Ukrainians fleeing westward, straining European social, economic, and political systems to breaking point. Think of the need for European defense spending to perhaps double, boosting budget deficits, debt levels, borrowing costs, hiking tax burdens, and slowing European growth.
Simply put those stalling the move to seize more than $200bn in immobilized Russian assets in Europe have derelicted their duty, and as a result, the whole European project is now at risk.
There is still time to act. European leaders need to have some gumption. They should remove the veto employed by the ECB and its allies because this is too important an issue to be decided by bankers and bureaucrats.
The Central Bank of Russia’s assets in European jurisdictions should be immediately confiscated and put in a fund for Ukraine’s defense. This could be used to buy munitions and military equipment.
Why the added urgency? Because the Munich Security Conference (MSC) on February 12-14 and the Russian-US talks in Saudi Arabia have laid bare the need to act now because the US may not be around for very much longer.
That means Europe needs much-improved leadership, both individually but also collectively, and indeed institutionally. European leaders have dithered for too long when faced by the clear and present danger from Russia.
Second, Europe needs, indeed it must, increase its defense spending by multiples of current levels to counter the existential threat from Russia and the now clear-cut reality that the US security backstop is much weakened, perhaps fatally so.
This should have been obvious to everyone when Russia’s full-scale invasion of Ukraine happened in February 2022. European leaders have literally fiddled while Ukraine has burned.
And the remarkable irony here is that some, like this author, have for the last few years given European leaders solutions, low-hanging, easy-to-pick solutions, as how to fund Ukraine’s defense.
I and others have long argued that the $330bn in Russian central bank assets immobilized in Western jurisdictions should be transferred to Ukraine, to fund arms purchases and for recovery and reconstruction. The funds, in cash, are readily available in Western banking systems and could be available to Ukraine at the push of a button. Morally, it is unarguable that the aggressor, Russia, should pay. Indeed, why should Western taxpayers fork out to cover the cost of Putin’s war?
Unfortunately, the ECB and its allies at some European Treasuries have doggedly blocked the move over the past three years. They have constantly made excuses as to why this should not happen. Pivotal to this is the argument that seizure of the $200bn or more in Europe would damage confidence in the euro as a reserve currency.
There is zero evidence to support this. There was barely any movement of assets following immobilization in 2022, which made absolutely clear that the assets of aggressors would be put beyond their reach.
Once seized, the assets can be put to good and immediate use. While Ukraine and Europe remain dependent on weapons purchases from the US, this could be turned to their advantage. President Trump might be reluctant, but Europe could massage his sentiments by pledging a large share of these funds to buy US equipment, thereby securing hundreds of thousands of US jobs.
Europe could call the fund the Trump Fund for Democracy, and Europe itself could add its own long-term pledge to buy US munitions, perhaps bolstering the total fund for arms purchases from the US to let’s say at least $500bn over 10 years, a $50bn-a-year agreement that would represent the largest arms purchase deal in history. It would be hard for Trump to say no.
Time is now absolutely of the essence. Ukraine, and Europe’s security, and even its way of life, are now on the line. The same European leaders who have shown little foresight or leadership over the past three years must act now.
Photo ops in Kyiv with President Zelenskyy are cheap, but the true price of Europe’s defense is expensive. Yes, of course, politically difficult decisions have to be taken, but surely even the most complacent now understand, after the terrible and worsening events of the past three years, that the costs of inaction will be multiples more expensive.
Seize Russian assets now. Give them to Ukraine.
Timothy Ash is a Senior Emerging Markets Sovereign Strategist at RBC BlueBay Asset Management in London. He is an Associate Fellow at Chatham House on their Russia and Eurasian program.
The opinions in this article are those of the author.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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