This famous quote is too often ignored in Whitehall, especially when it comes to legal advice. As Ministers and senior officials wrangle over the forthcoming Budget one source of additional funds is now being actively considered. This is to repurpose all of the Russian assets (and not just the interest) currently frozen both in the UK and the rest of Europe. Since the second invasion of Ukraine in Feb 2022 the official Government line has been that the best way to repurpose all Russian assets in the UK is in coordination with the G7 and European allies. However, Russia is now deliberately testing European resolve and the calls for action are growing. Germany, France and the UK have now agreed that
“we are ready to progress towards using…… the value of the immobilised Russian sovereign assets”
Others in Europe disagree. Belgium has frozen an estimated $140-$170bn of Russian state assets, but sadly the Belgian PM has said that any seizure of Russian state assets would be “an act of war”. This seems an odd statement given that Putin is actively trying to assassinate people across Europe, as well as sending drones into Poland, Romania and Denmark. There is also little chance that the current Hungarian government would support repurposing Russian assets. So, although the tide may be turning, the chances of a broad European consensus on this issue arriving between now and Budget Day are not great. Now is the time to cash in the support that has been promised from France, Germany, the UK, Poland, and other European states. The Belgians may change their mind, but Hungary, Slovakia and others of that ilk will not. Seeking the good solution – securing a coalition of the willing to use the assets – rather than seeking the best solution – getting all of Europe to agree – is now the obvious political choice both here and in Paris and Berlin.
There are various international legal experts who suggest that using these assets can be done on the basis that repurposing is a legitimate countermeasure to the illegal invasion of Ukraine. The money would be provided as a loan to Ukraine. Once Russia has paid the right level of repatriations to Ukraine then the loan can be repaid and the assets will be returned to the Russian Government. This will also have to be accompanied by a lasting peace agreement that removes as far as possible the risk of any further Russian attacks on Ukraine.
With the right political will France, Germany and the UK could reach agreement on repurposing Russian assets before Budget Day on Nov 26th. The proportion of these assets that could be used to increase overall support for Ukraine and/or replace existing funding from European taxpayers is uncertain. Putin has already seized billions of pounds of British and other European assets. UK and European pensioners and other investors witnessing this might wonder why we are not taking reciprocal action. This situation reinforces the case for using the assets to reduce the use of taxpayers cash to support Ukraine.
Currently the UK is estimated to have frozen £24bn of Russian state assets. Ideally decisions about using these assets should be taken with France and Germany. From a rather narrow UK perspective there are various positive choices for the Government. Previously about £3bn a year of taxpayers’ money was being spent on supporting Ukraine. This could be cut to £1bn, enabling £2bn a year to be diverted to other UK spending priorities. £2bn per year could be provided through the proposed loan based on Russian assets, ensuring that the total UK support to Ukraine remains at £3bn a year. Another option would be to increase the amount provided by the proposed loan by £4bn, which could increase UK support from £3bn to £5bn per year. This latter option is especially attractive given the increasing scale of Russian attacks on Ukraine. With either option there would be an additional £2bn a year available to the UK Government for spending on other priorities. These are just some of the options if the three governments decide to take the right decisions.
In the short term there is pressure on UK Ministers to use UK funding to support NATO’s Prioritised Ukraine Requirements List (PURL). The disadvantage of this approach is it primarily benefits the US defence industry. Unfortunately, due to the previous Governments’ failure to properly invest in the UK defence industrial base most of these urgent requirements can’t be provided within the required timescale by UK companies. Of course once the MoD start signing procurement contracts shortly after the publication of the Defence Investment Plan in theory Ministers can start spending some of the new funds for Ukraine on British workers, developing new skills and expertise.
One challenge that is currently a very high priority for most Western defence equipment experts is how to counter the use of fibre optic cables to fly Russian drones. The use of these drones makes them immune to the normal jamming techniques so successfully used by Ukraine. AI on its own will not deliver the solution. It requires the types of innovation, experimentation and other expertise which those working in UK defence industries have demonstrated in their support for Ukraine in the last 3 years. They are standing on the shoulders of those British giants such as Frank Whittle and Alan Turing.
Given the disturbing challenges facing UK national security and the UK economy Ministers and senior officials should be making decisions about Russian assets at a much faster pace than they would normally be comfortable with. The legal and diplomatic risks are higher than normal but the consequences of delay will only benefit Putin. Churchill had a very mixed record as a wartime leader but his insistent demands for ‘Action this Day’ is something that our current Ministers might consider adopting.
