Canada’s Pioneering Approach to Using Russian Assets for Ukraine: A Historic and Complex Initiative

Introduction to Canada’s Bold Initiative

Canada is on the verge of making history by taking unprecedented steps to expropriate assets held by the Russian government and sanctioned Russian citizens. These measures aim to support Ukraine’s war effort, which has been ongoing since Russia’s full-scale invasion in February 2022. Ottawa has been at the forefront of this innovative idea, which involves using Moscow’s frozen assets to help Ukraine defend itself and rebuild its infrastructure. This approach, while promising, raises significant questions about its legality and implications under international law.

The Global Context and Rationale Behind the Plan

Western countries, including Canada, have imposed sanctions on Russia to isolate it economically and pressure it to end its aggression. Sanctions typically involve freezing assets to influence behavior, but a new strategy has emerged: using the interest earned on these frozen accounts or the cash within them to support Ukraine. Proponents argue this is a cost-effective way to help Ukraine repel Russian forces and rebuild damaged infrastructure. Additionally, they believe it could inflict financial pain on Russia, potentially leading to a pause or withdrawal of its attacks.

However, critics warn that expropriation could violate international law, setting a dangerous precedent where states might seize private property arbitrarily. This has sparked debate among legal experts, policymakers, and diplomats. Despite the risks, Canada has been a vocal advocate for this approach, even though the majority of Russian assets are not held within its borders. Most Russian government and sanctioned citizens’ assets are in European banks, making EU cooperation essential for implementing this plan.

The Legal and Practical Challenges Ahead

Implementing such a plan is no simple task. Canada would need to follow a three-step process: freezing, seizing, and forfeiting assets to the Crown. Freezing assets is straightforward, involving orders to banks to halt transactions for sanctioned individuals. However, seizing and forfeiting assets are more complex and have not been tested in court. This process requires a cabinet order to seize assets, followed by court proceedings to have them forfeited to the Crown. Once in government hands, these funds could be sent to Ukraine.

Mark Kersten, an international law professor, has expressed frustration over the government’s slow progress, despite its promises to act. He notes that Canada has yet to initiate court proceedings or explain the delays publicly. Meanwhile, the RCMP has frozen $140 million in assets and blocked $317 million in transactions under Canada’s sanctions regime as of January 2023. However, the exact amount of Russian assets in Canada remains unclear.

Ottawa’s Ambitious Goals and the Role of Alliances

Canada’s efforts are part of a broader international initiative to support Ukraine financially. In collaboration with its G7 allies, Canada helped design a system allowing the use of interest from frozen European assets to secure $5 billion in loans for Ukraine. The $5 billion funding is effectively a loan, with repayment guaranteed by the interest earned on these frozen funds. Prime Minister Justin Trudeau recently announced that Canada would disburse half of this amount "in the coming days," with the rest to follow later.

This approach reflects a growing willingness among allies to think creatively about how to support Ukraine without directly committing more taxpayer funds. However, there is no international consensus on how to proceed, and many countries remain hesitant to confiscate state-owned assets outright. Instead, they prefer to use interest earned from frozen accounts, which is seen as less controversial.

The Controversy and Critics of Asset Expropriation

Critics argue that expropriating Russian assets crosses a legal boundary. Russian Ambassador Oleg Stepanov has accused Canada of violating international norms, claiming that any funds sent to Ukraine "will either be burned or stolen outright." Legal experts like Mark Kersten highlight that private assets are protected under international law, while government-owned assets may not be. This distinction creates a gray area that could have far-reaching implications for global asset seizure practices.

The seizing of a Russian cargo plane at Toronto’s Pearson Airport adds another layer to this story. Ottawa officially seized the plane in June 2023, but the case is now tied up in legal disputes under a bilateral investment agreement. Similarly, attempts to seize $36 million allegedly linked to Russian oligarch Roman Abramovich have stalled, with reports suggesting the funds may actually belong to an investment fund in the Cayman Islands.

The Implications for International Law and Future Relations

Canada’s plan to expropriate Russian assets is not just about funding Ukraine; it also tests the limits of international law. The concept of "countermeasures" allows states to take actions that would normally be illegal in response to another state’s wrongdoing. However, using this principle to seize assets is uncharted territory. Many experts warn that this could set a dangerous precedent, emboldening other nations to follow suit in future conflicts.

The global economy’s interconnectedness adds another layer of complexity. Canadian businesses operating internationally must navigate the implications of Ottawa’s sanctions regime, which is often more aggressive than those of other jurisdictions. As the world watches, Canada’s actions will determine whether this approach becomes a model for future conflicts or a cautionary tale about overreach.

In conclusion, Canada’s pioneering effort to expropriate Russian assets for Ukraine’s benefit is both bold and risky. While it offers a creative solution to funding Ukraine’s war effort, it also raises critical questions about legality, fairness, and the long-term consequences for international relations. As the process unfolds, the world will be closely monitoring whether this initiative succeeds—or whether it sets a precedent that destabilizes global economic and legal systems.