Ukraine - we need new financing solutions

See my latest cepa.org piece:

https://cepa.org/article/we-can-force-russia-to-fund-ukraines-fight-for-freedom/

Events over the past week, first with Fico’s win in Slovak elections and likely ascent as PM to the European awkward club on Ukraine with Viktor Orban, and then McCarthy’s ousting as speaker of the US House of Representatives, has just laid bare the vulnerability of the West’s current tax payer funded model for supporting Ukraine. While the necessity of supporting Ukraine, at all cost, should be obvious to all - it’s the best long term investment the West can make in its own defence against an aggressive and expansionist Russia - it is a hard sell to electorates why we should be spending hundreds of billions of tax payer dollars on Ukraine while there is a cost of living crisis at home. Indeed, as the McCarthy and Fico experiences should tell us, ploughing on with a tax payer model of Ukraine funding risks an ever greater populist backlash at home which could risk the very survival of the Western Liberal Market Democracy, which surely Ukraine’s fight is all about. Perhaps we just need to better explain the imperative of backing Ukraine. That Russia’s victory in Ukraine would put an aggressor right up to NATO’s borders, give a green light for further Russian expansion and a similar signal to China over Taiwan. But also it would risk the economic and social collapse of Ukraine which would risk flooding Europe with tens of millions of refugees and arms from the conflict. The longer term costs will be much larger. An alternative would be to look for alternative financing sources for Ukraine which are not a draw on the Western taxpayer. And therein the obvious option is to utilise an estimated $400 billion in Russian assets frozen, or immobilised, in Western jurisdictions. Our governments give us lame excuses why these cannot be used from the risk it would pose to the principle of sovereign immunity, the dollar’s position as a reserve currency, and the risk of tit for tat appropriation of Western assets in Russia. These are weak arguments in their own right but especially when set against the risk of the current Western tax payer model of funding Ukraine failing and the risk of Ukraine’s defeat. The sovereign immunity argument has been debunked in a recent paper by Philip Zelikow et al, which argues that a state only has the right to sovereign immunity if is abiding by international law. Russia clearly is not. The dollar’s position as a reserve currency would no more be undermined by the move to seize Russian assets for use in Ukraine as has already been the case by the freezing of these assets. Authoritarian regimes will have already got the message and will have moved assets accordingly. Those horses have already bolted. And as to the tit for tat argument, well Russia is already seizing, in effect, Western assets under its jurisdiction by forcing owners to sell at knock down prices. The question is also whether Western national security interests should be put behind the interests of Western businesses which ultimately made the wrong call in investing in Russia. We might not like seizing and using Russian assets to support Ukraine as it raises rule of law reg flags. But laws can and should be changed when national security is at stake. If we fail in adequately and fairly financing Ukraine, we risk not only Ukraine’s defeat but a political and populist backlash in our own democracies. Imagine the lunacy of Western taxpayers writing a blank cheque for Ukraine’s victory and reconstruction, only then to hand back on a plate the frozen $400 billion to Russia, the aggressor. Maybe we should include a note in the envelope with the cheque asking “what more can we do to help you Mr Putin?”