A top economic adviser to Ukrainian President Volodymyr Zelensky says that the country is working with its allies to seize Russian assets.
Oleg Ustenko said in an interview that Ukraine was working with other countries to launch a mass attack on all major assets, and specifically highlighted Russia's foreign reserves and oil tanker as significant overseas assets.
The economic pressure on Russia would intensify if an asset seizure were to happen. With billions of dollars in Russian assets already frozen, Western countries could make good on that threat.
The World Bank predicts that the Ukrainian economy will contract by as much as 45% in the wake of the Russian invasion. If Ustenko's estimates are true, Russia's invasion has caused almost $1 trillion in damage to Ukraine, which would be the size of the entire GDP of the country in 2020.
Ustenko believes that seizing assets and transferring them to Ukraine could be used to help alleviate the cost of the country's rebuilding.
According to the International Money Fund, Russian assets include both government reserves and foreign direct investment from the private sector. The dollar value of assets already frozen by Ukraine's allies is in the billions, if not hundreds of billions of dollars.
Russia's foreign currency reserves have been frozen by the U.S., EU, and Japan.
Billions of dollars in assets have been frozen. Switzerland, long a home for hidden Russian wealth, announced on April 7 that it had frozen about $8 billion in Russian assets.
There is a debate over the effectiveness of the current sanctions regime. Capital controls and continued demand for Russian energy exports have helped the ruble recover all of its losses. Russian energy will give Moscow $321 billion in revenue this year, a 33% increase from the year before, according to a report.
The hundreds of billions of dollars in frozen Russian currency should be seized to support Ukrainian refugees and the reconstruction of the country. The Atlantic Council's Adrian Karatnycky wrote an article for the Wall Street Journal about the importance of the trapped funds.
It would be difficult to seize assets. It wouldn't affect ownership if assets were frozen. Even though the U.K. sanctions against Roman Abramovich did not affect his ownership of the club, he still had to sell it because of the sanctions.
Any attempt to take ownership of a Russian asset would have to go through the court system. On April 4, the U.S. seized a 255-foot yacht belonging to Russian tycoon Viktor Vekselberg while it was docked in Spain. The DOJ had to get a seizure warrant from a US court in order to do so. The U.S. had to get the cooperation of Spanish authorities to seize the boat.
The U.S. government could use the proceeds from the auction of Vekselberg's yacht to fund the Ukrainian government.
Lawyers told Fortune that if the government tried to take ownership of the boat, it would have to prove that it was tied to a criminal offense before it could go to court. If they lost the case, they would have to return the yacht to its Russian owner.
The American Civil Liberties Union helped to kill a proposal that would have allowed the president to seize Russian assets in the U.S.
The bill was so unconstitutional that it raised the possibility that a Russian national could win a case in an American court.
The prospect of lengthy and costly legal battles may deter people from trying to move Russian assets.
A court battle could pay off. The families of 9/11 victims won a court order to seize part of the Afghan central bank's reserves, which had been frozen after the Taliban takeover of Kabul. President Biden decided to split the frozen reserves into two parts, one going to the victims and the other to humanitarian assistance for Afghanistan.
Mark Weidemaier, a professor of law, said that the Afghan precedent shows that Washington is willing to take dramatic steps when it doesn't like the government of a foreign state.
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