Ukraine wants frozen Russian assets for war damage, not just interest

By Pavel Polityuk

KYIV (Reuters) – Ukraine told Western allies on Thursday that giving it the interest accrued from frozen Russian assets would not be enough to compensate for damage sustained by the war and that it hoped to receive the assets in full.

Kyiv estimates $400 billion will be needed to rebuild the country devastated by Russia’s full-scale invasion in February 2022, an amount it believes could double if compensation for the war’s victims is taken into account.

European Commission President Ursula von der Leyen said last month the Commission was working on a proposal to pool some of the profits derived from frozen Russian state assets to help Ukraine and its post-war reconstruction.

She said the value of frozen Russian sovereign assets was around 211 billion euros ($223 billion), noting the bloc had decided that Russia must pay for Ukraine’s reconstruction.

Iryna Mudra, Ukraine’s deputy justice minister, told Reuters Kyiv’s partners were considering introducing a tax on income or investment of frozen Russian assets, an idea she said Kyiv welcomed but saw as insufficient.

There was “no alternative”, she said, to the solution of confiscating the assets in full and handing them to Ukraine.

“Yes, such a decision requires political will, and therefore it is especially dangerous if additional initiatives are considered a successful solution to all problems.”

“Any alternatives, no matter how sincere and noble they are, generate insufficient funds and can be solely as an intermediate and fast enough option to collect several billions for the immediate needs of Ukraine’s reconstruction,” she said.

The issue of finding funds to rebuild the economy and wage war with Russia is more urgent than ever, as Kyiv fears a reduction in Western aid and the Ukrainian economy is unable to generate sufficient funds.

“We need a joint decision to hold (this) money which is frozen now and take (this) money for renovation,” Ukrainian President Volodymyr Zelenskiy told Reuters NEXT in an interview on Wednesday.

“We had (a) budget gap of $40 billion, it was last year, this year we managed better, and now (there is a) 5% increase of GDP but anyway we have a big gap. If we use only interest from all (this) frozen money, we can close about a half of this gap.”

Ukraine’s 2024 state budget, passed by parliament on Thursday, envisages a deficit of about $41 billion or around 20% of GDP, with more than half of spending planned for defence.

(Reporting by Pavel Polityuk; Editing by Mark Potter)