Breakingviews - How a syndicated loan can funnel cash to Ukraine

Hugo Dixon - Reuters - 26/02
The need for creative ideas to fund Ukraine has never been more apparent. Two years on from Russia’s illegal invasion, its army is struggling on the battlefield in part because of lack of ammunition. Meanwhile, President Joe Biden has so far failed to persuade the U.S. Congress to approve more military aid.
LONDON, Feb 26 (Reuters Breakingviews) - The need for creative ideas to fund Ukraine has never been more apparent. Two years on from Russia’s illegal invasion, its army is struggling on the battlefield in part because of lack of ammunition. Meanwhile, President Joe Biden has so far failed to persuade the U.S. Congress to approve more military aid.
Western governments are debating whether to seize $300 billion of Russian assets which were frozen at the start of the war. A rather different idea, which I proposed last month, is that Kyiv could finance itself by issuing “reparation bonds”, backed by its claim for war damages against Russia. I have fleshed out that idea in a joint paper, opens new tab with Lee Buchheit, a veteran legal expert in sovereign debt, and Daleep Singh, who on Monday returns to the White House as deputy national security advisor for international economics, but who was writing in a personal capacity.
The idea in a nutshell is that Ukraine would pledge its claim for reparations against Russia to a syndicate of its allies in return for a loan. If Moscow refused to pay the damages, the allies could then use Russia’s frozen assets to pay off the loan. The justification for doing this is the widely recognised legal principle that, if a creditor controls a debtor’s assets, it can set off those assets against an unpaid debt.

SET-OFF TO THE RESCUE

Ukraine has an indubitable claim under international law for reparations against Russia. The cost of rebuilding the country now stands at $486 billion, acc...
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