Several members of the United States (U.S.) House of Representatives are opposed to the notion that Ukraine requires their support in its war of resistance against Russia arguing, ostensibly, that enough has been provided to-date, that budget priorities should be directed elsewhere while repeating a narrative, without justification, that the distribution of aid to Ukraine has been mismanaged and much has been wasted in the process. The arguments are disingenuous, no more than contrived political statements that demonstrate a profound ignorance of the global consequences of their proposed inaction.
Arming Ukraine denies Russia its desired victory in retaining Crimea and avoids the far greater cost imposed by an aggressor whose stated aim is the restoration of a Russian empire with all its manifold consequences. Does it benefit the U.S. for Europe to be in a continuous state of conflict with Russia? Does it benefit the U.S. for Russia to demonstrate to China and other malign nations that the U.S. always falters when it comes to showing stamina? Moreover, no U.S. troops are being sacrificed in this fight against a rogue nation that has cost the U.S. much since the end of World War II. Is it not finally the time, after more than seven decades, to end the charade and deliver Russia its due simply by supporting a war of resistance that could very well bring about a decisive end to its corrosive behavior?
The deleterious effect of Russia’s war upon the stability and security of eastern Europe; its meddling alongside Iran in the current Israeli-Palestinian conflict and its collusion with Iranian-supported terrorist organizations, Hamas and Hezbollah; its promotion of Syria’s civil war and its resultant humanitarian crisis appear to have somehow evaded the notice of House members. It might also serve to remind them of that special form of Russian malignancy manifest in its state mercenary group, Wagner, that has spread its violence deeply into Africa for the purpose of gaining control of natural resources and political influence. It has done the same in Latin America where there is the added aim of undermining U.S. relations and conducting its particular brand of hybrid warfare promoting mass migration toward the U.S. border.
Ukraine, with the global aid it has been provided in the past 20 months, has managed to bring the Russian military to a standstill, in the process, reducing Russia’s conventional combat capability by 50%, and degrading its capacity to inflict any similar aggression upon eastern Europe, including the Baltic states. To regain the remainder of its territory, Ukraine will require armament that is better able to target Russian military installations currently beyond its reach, including their naval ships in Crimea and elsewhere. Had these been available much earlier in the war, as was being urged repeatedly by respected U.S. retired military leaders, Ukraine’s counteroffensive would have proceeded at greater pace.
Continued funding is needed to press the current offensive forward more than just for military purposes. Russia’s hold on Crimea could be at stake under the right circumstances and, with it, Vladimir Putin’s hold on power as winter approaches. An upcoming presidential election looms ahead in March 2024 and, more than in previous elections, Putin has much to answer for in the present one. His penchant for assassinating or imprisoning potential rivals and eliminating journalists in the past has afforded him repeated success with his electoral count but a tacit populist resentment may be mounting, enough to embolden challengers. He may have good reason to think that his nation is not ready to sacrifice another six years under his watch or that of any other member of his regime. The younger generation, in particular, seems less inclined to pay any mind to state propaganda and to rely on other sources far more adept at unraveling the truth.
It is the Crimea question that deserves focus at this very moment as Putin’s fate hinges on retention of this strategic asset. For this reason alone, funding is needed to herald the beginning of an end to this conflict. The expulsion of Russian troops from occupied Ukrainian territory would also leave Putin to explain to his people the loss of more than 300,000 troops on this front after committing them to an unjustified war in 2022. The shame brought upon his military and his nation for this misadventure will last considerably longer than the brief time he has remaining.
What indeed is the indemnification for the willful and indiscriminate killing of innocence, the mass executions, the destruction of hospitals and clinics, the dislocation of more than 14 million people from their homes and 15.7 million placed in need of humanitarian aid just in the first year of the war, the kidnapping of children now under indictment by the International Criminal Court, and the rape and torture of civilians? Add to this the Russian pillaging of Ukrainian grain, another war crime, by reregistering Ukrainian grain elevators to state-owned Russian businesses allowing for the theft of upwards of 4 million tons. Is this the Russia we must continue to cope with?
Both U.S. President Joe Biden and mature elements within Congress have understood from the beginning that appropriate action was needed. Expenditure by the U.S. in support of Ukraine to-date for military, economic and humanitarian needs has amounted to $113.4 billion, $70 billion of which went directly to the U.S. defense industry for the manufacture of military hardware for Ukraine and the creation of substantial employment opportunity. As an aside, the advertisement of U.S. armament on the Ukrainian front, appears to have prompted the purchase of $90 billion of American military hardware by European countries alone, stimulating the U.S. economy even further.
Beyond the conventional means of securing funds by legislative action, further options have been raised that, with the support of Congress, would help considerably in mitigating the cost of Russia’s war. The level of Russian criminality manifested has provided the impetus to apply Russia’s foreign assets toward the cost of this war. Legal concerns addressing the seizure of Russian assets were raised during the early stage of Russia’s war. It was evident even then that the delicacy and the time afforded to the management of regulatory and legal matters related to money was to become drastically disproportionate to the urgency required to begin mending the human harm rendered by Russian aggression. In a matter of months, the world became aware of the nature of Russian brutality toward a civilian population. Well within the first year of war, were not Russian atrocities both so undeniable and indefensible that extended deliberation was needed to overcome the concerns raised over money?
The freezing or immobilization of Russian Central Bank assets in the U.S. was a necessary step at the outset of the war as it was elsewhere. The time has come for release of these assets through their seizure and distribution toward Ukraine’s war effort and its monumental humanitarian needs incurred by the war. The General Assembly of the United Nations had, in fact, adopted such a resolution one year ago. Prior concern that these are public assets and should be protected from such violation can be countered by the seemingly overwhelming sentiment expressed by the Russian public in support of Russia’s war as reported by Putin’s very own state pollsters and media. Such public enthusiasm should be acknowledged accordingly.
Moreover, the added concern that such decisions may threaten future U.S. assets housed in foreign banks cannot escape the image of the blatant violation of international law perpetrated by Russia for invading the sovereign territory of a neighboring nation, a measure to which all civilized nations should be held accountable. The seizure of assets in this fashion has been promoted as means of tempering the ambitions of authoritarian regimes with similar inclinations as might be said for China.
The November 8, 2023 announcement by the House Foreign Affairs Committee Chairman Michael McCaul (R-TX) of the passage of H.R. 4175, the Rebuilding Economic Prosperity and Opportunity (REPO) for Ukrainians Act now provides legal authority for President Biden to seize Russian sovereign assets invested by Russia’s Central Bank and any other of its financial entities within the U.S. and transfer them to Ukraine. The bipartisan legislation had been reintroduced in the Senate in June 2023 by Jim Risch (R-ID), the ranking Republican in the Senate Foreign Relations Committee, with Sheldon Whitehouse (D-RI), and Representatives Michael McCaul and Marcy Kaptur (D-OH) in the House. The bill targets $5.06 billion of Russian Central Bank assets.
Another estimated $280 billion of these assets are otherwise situated globally with 80% housed within the European Union (EU). To-date, financial and legal concerns for financial markets raised by Christine Lagarde, president of the European Central Bank, seem to hamper even the taxation of profits generated from frozen Russian assets but these have been challenged by European Commission President Ursula von der Leyen and European Council President Charles Michel who sought the backing of the EU. Despite this indecision, G7 leaders have gone on to map Russian sovereign asset holdings that are immobilized in member jurisdictions, as well as those of others in the EU and Australia. In accordance with their respective legal authority, these assets will remain immobilized until Russia has paid for the damages inflicted upon Ukrainians.
Countries have taken individual action of a similar sort. The government of Estonia recently put forward a draft law that, upon approval by parliament, would allow the transfer of frozen Russian assets, worth about $40 million, to Ukraine. Belgium holds most of Russia’s Central Bank foreign assets, approximately $125 billion, which is managed by its clearing house, Euroclear. It will collect about $2.4 billion in taxes on the interest from these assets in 2023 and 2024 and intends to transfer this to Ukraine for the purpose of humanitarian aid and the purchase of military equipment.
In a similar action to that of H.R. 4175, legislative actions in the U.S. were initiated in the autumn of 2022 proposing the transfer of liquidated Russian oligarch assets to aid Ukraine. This would be the Russian Elites, Proxies, and Oligarchs (REPO) Act which was introduced by Senators Lindsey Graham (R-SC), Jim Risch (R-ID), Sheldon Whitehouse (D-RI), Richard Blumenthal (D-CT) and Michael Bennet (D-CO) as an amendment to the FY2023 government appropriations bill. It became law in December 2022.
The global pursuit of Russian oligarch wealth by the REPO Task Force (REPOTF) has continued since its inception in March 2022. The REPOTF consists of representatives from the EU, G7 nations and Australia, and was set up as a coordinated effort to find, seize and confiscate the assets of sanctioned individuals or entities. By March 2023, it had blocked or frozen $58 billion of individual Russian assets. Canada was the first G7 nation to pursue the actual forfeiture of $26 million from Granite Capital Holdings owned by sanctioned Russian oligarch, Roman Abramovich in December 2022. A U.S. federal judge had earlier authorized Department of Justice (DOJ) authorities to pursue the seizure of a Boeing 787-8 Dreamliner and a Gulfstream G650ER jet, valued together at $410 million, both belonging to Abramovich, for violating export restrictions related to the war.
The first actual U.S. federal ruling permitting the forfeiture of assets of another Russian oligarch, Konstantin Malofeev, came in February 2023 when DOJ prosecutors showed that he had financed pro-Russian separatists to aid in Putin’s 2014 illegal seizure of Crimea. In May 2023, Attorney General Merrick Garland approved the transfer of the money to the State Department for distribution to Ukraine. The DOJ has seized a $300-million yacht in Fiji and a $90-million yacht in Spanish waters belonging to Russian oligarchs, Suleiman Kerimov and Viktor Vekselberg, respectively, both accused of money laundering among other violations.
Difficulties remain in the tracking of individual Russian assets. The multi-layered maze of offshore shell accounts that blur the identity of the original owner, money laundering through blind trusts that distribute assets among ostensibly unrelated entities, cryptocurrency exchanges, western enablers, and the global mobility of certain assets make the pursuit of oligarch riches a time-consuming and labor-intensive task. But the will is there to undertake the work with successes mounting over time.
There is another avenue of available funding to pursue that addresses the issue of the contributions made to Russia’s war effort by those companies that continue to profit from doing business in Russia. The Chief Executive Leadership Institute (CELI) at the Yale School of Management published a comprehensive list of global companies, last updated in November 2023, that have either left Russia entirely or remained in some capacity to continue conducting business. The Kyiv School of Economics (KSE) in collaboration with the Ukrainian Ministries of Economy, Foreign Affairs and Digital Transformation, has used the CELI database to categorize individual foreign companies according to the status of operations within Russia, analyzing changes in share prices and capitalization of parent groups of these companies. As of November 20, more than 1,500 foreign companies have continued operations in Russian of which more than 1,200 have indicated that they have in some fashion reduced operations temporarily or have been in the process of shutting down. Only 297 have actually completed withdrawal altogether from Russia.
Apart from providing employment for tens of thousands of Russian workers, the profit taxes paid to the Kremlin by these companies furnish indirect funding of Russia’s war along with its violations of international human rights. Likewise, they provide the means for further state funding through workers’ taxable income while paying for individual benefits in addition. In 2022, global corporations gained $214 billion in revenue with profits amounting to more than $14 billion. From this alone, a profit tax of at least $3.5 billion was paid to the Kremlin. While upwards of 25% of all profit tax came from entities headquartered in G7 countries, U.S. companies accounted for the largest revenues received, and paid $712 million in profit tax to the Kremlin. German companies came second with a payment of $402 million. Of those U.S. companies doing business in Russia at the start of the war, 44% have remained. To give this some perspective, the cost of a Russian T-72 tank is $1.2 million so that the 2022 tax monies given to Russia by U.S. companies alone would provide for the manufacture of 593 Russian tanks or 700 Kalibr cruise missiles or the purchase of 35,600 Iranian Shaheed suicide drones.
The U.S. accounts for 23 of the 217 companies that continue business as usual with Russia and for 47 of the 156 companies that have held off on new development but otherwise have continued business in large measure as before. Just four U.S. companies – Phillip-Morris, PepsiCo, Mars and Proctor & Gamble earned a combined revenue in Russia of $17.4 billion in 2022. PepsiCo, otherwise, provides salaries to 20,000 Russians and further compensation to 40,000 Russian agricultural workers within its supply chain. It is unfortunate to see that the U.S. taxpayer has provided billions of dollars for Ukraine’s war effort only to see U.S. companies countering the effort by providing Russia with the means to challenge Ukraine’s war effort with funds gathered through taxation. The funds will undoubtedly go to supporting the war in some fashion, perhaps through the purchase of armament from North Korea and Iran given Putin’s propensity to prioritize his war over any other endeavor that might actually benefit his country.
Some of the justification given by these companies for the retention of business in Russia had to do with the provision of products they regarded as “essential” without clarifying what this meant. It is difficult, otherwise, to surmise why a presumed world power such as Russia would require an essential good from a foreign source that it could not easily provide for itself. Moreover, the largest revenues generated in Russia by foreign industry happened to come from the sale of alcohol, tobacco, luxury items, confectionary and automobiles. These have more to do with standard of living than the provision of goods for some dire need yet to be announced. In some cases, there are concerns that relate to abandonment of property that would be expropriated by Russia and used to support the war effort as might be the case in a food processing facility. Other concerns that relate to fiduciary responsibilities, maintaining market share, protecting assets and some form of compensatory contribution toward Ukraine’s reconstruction appear to pale in comparison to the immense toll of the atrocities committed by Russia.
Consideration should be given by all nations with companies headquartered within their domain for a surcharge on the profits made in Russia. The funds gained could then be used for direct aid to Ukraine in the moment or saved for later reparations with a note provided to shareholders thanking them for the humanitarian benefits they have provided to a nation in great need. The action additionally would provide a deterrence against further business intentions in Russia and be seen as a penalty for acting at cross-purposes with those of the respective nation. The amount of the surcharge would be commensurate with the extent of the business undertaken and the amount of profit gained. Both western and non-western companies should be subject to such charges. Those non-western companies which trade with the west while continuing business with Russia should also be considered with similar liability.
The war that Russia has chosen to conduct has reached a critical stage. It is an illegal war that threatens a world order and is perpetrated by a nation that since WWII has remained an adversary of the U.S. It is a conflict without resolution and only worsening by the actions of a Stalinist wannabe under indictment by the International Criminal Court. Since the days of the U.S.-led Marshall Plan, trillions of dollars have been spent in anticipation of an ultimate confrontation with this adversary. From 1948 to 1952, the U.S. with its Gross National Product (GDP) of $300 billion (1950) while otherwise actively engaged in the Korean War (1950-1953), contributed $13.3 billion in support of Europe and its revitalization in the face of a Soviet threat. In today’s currency, this sum would amount to $170 billion when the U.S. GDP stands at $26.9 trillion. Now we have a nation, Ukraine, which has taken on the challenge of dealing with a rogue adversary that stands against every principle of democracy and attempts to dictate the destiny of its neighbor simply because it feels it has a right to do so. Ukraine has become the bulwark of Europe and of several nations to its west that remain threatened by a similar fate. It does not ask for the sacrifice of other nations’ military personnel, merely the support that it needs to bring a criminal entity to justice and, in the process, finally bring an end to this ugly chapter in history.
Copyright @Kost Elisevich, MD, PhD 2023. All rights reserved. Any illegal reproduction of this content will result in immediate legal action.
