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Financial Sanctions Need Global Governance

Like any other powerful weapon, financial sanctions should be deployed in accordance with international legal principles. That is why the G7 and the G20, together with the international financial institutions, should establish a multilateral framework to govern their use.

LONDON – As Russia’s war against Ukraine has entered its third year, Western governments are finding it increasingly difficult to muster the funding Ukraine needs to defend itself. The European Union struggled to reach a €50 billion ($54 billion) aid deal in February, and the United States remains deadlocked over its own $60 billion funding package. Now, calls to use Russia’s own assets to fund the Ukrainian war effort are growing louder.

At stake are some $300 billion in central-bank reserves, which Western governments – including the EU and the US – froze immediately after Russia invaded, in an effort both to punish Russia and to limit the resources it could use to finance its aggression. It was a radical move: the last time comprehensive financial sanctions were imposed on a major country, with broad – though not universal – international acceptance, was in the 1930s, against Italy and Japan. (The sanctions against Russia triggered by its 2014 annexation of Crimea were far less extensive than those imposed in 2022.)

The US now wants to take an even bolder step, confiscating Russia’s assets and transferring them to Ukraine. Their argument is straightforward: Russia should be made to compensate Ukraine for its illegal and highly destructive war. Russia’s central-bank reserves would fulfill – at least in part – Ukraine’s valid claims for war damages.