Turning Russian Funds into Ukrainian War Bonds

A Proposal from Your Author Over at the FT

Dear Reader,

apologies for the lack of a post these last few days - though I have a decent excuse. I had been planning on writing a summary of some thinking I have been doing about how to seize Russia’s frozen sovereign funds when my friend Yakov Feygin - one of the leading thinkers on political economy both in the US today and in Russia / the Soviet Union historically (pre-order his book! ) - reached out to ask if I had gotten any further with one aspect I had discussed with him, namely how they could be used to help finance Ukraine. So we got to chatting and decided to write something together, which the kind folks over at the Financial Times’ Alphaville blog were interested in publishing!

So please find a piece co-written by Yakov and I over at their website (Alphaville is separate from the FT paywall, though you will need to register to get past it, I promise its worth it!) on how Russian frozen sovereign assets should be used to invest in a new unique form of Ukrainian debt, namely a war bond with payment in kind interest and linked to war damages.

The piece over in the FT hopefully speaks for itself , but I want to make clear that Yakov and I are not wedded to each and every detail of the proposal - and in some areas we are purposefully ambiguous, such as the timing for rolling funds into the Ukrainian debt structure we propose, so as to leave open the possibility of doing so only as debt matures or in larger slugs. I’m glad to say that we seem to be in good company, with Brad Setser blogging over at the Council on Foreign Relations about his own ideas for how to mobilise Russia’s frozen reserves. And better yet better, the Financial Times reported shortly after our piece came out that the EU is perhaps open to some creative measures to use Russian assets to backstop Ukrainian debt issuance. There is merit to that proposal, and perhaps even to combining some of the aspects of Yakov and mine, though again I would stress that I would be happiest if the West got over its Teutonic concerns and did proceed to seize the assets - I have also recently argued over at Al Jazeera that the concerns about blowback are overblown. But hopefully Yakov and my piece can go a small way towards at least helping to find creative ways past that intransigence…

More to come on this front hopefully soon!