Who Should Pay for the Reconstruction of Ukraine After the War?

This was a question that CNN’s Fareed Zakaria posed to Larry Summer, former US Secretary of the Treasury and President Emeritus of Harvard University, on his Sunday morning GPS show (February 26th 2023).

Secretary Summer’s response was that Russia, being the aggressor, should be responsible and its assets around the globe seized, to finance Ukrainian reconstruction. He supported his opinion with two antecedents.

The first was the Soviet Union seizing German assets after WWII to rebuild its own economy and infrastructure. 

The second of Secretary Summer’s references was the 1991 Gulf War, when the United Nations Security Council passed a resolution, known as Resolution 687, which required Iraq to pay reparations to Kuwait to rebuild its economy and infrastructure, and imposed sanctions on Iraq until it complied with the resolution.

The Secretary further argued that by imposing this forfeiture on “the aggressor”, it will set a precedent and serve as a deterrent to any other sovereign nation that might have designs on invading another.

Respectfully, I question the comparison between the current Russian-Ukrainian situation to the WWII Russian-German asset seizure, and the 1991 Iraq-Kuwait UN reparation payment obligation.  I will also offer an alternate solution to the reconstruction of Ukraine after the war.

Disparate Comparisons

Firstly, Secretary Summer’s suggestion is based on the premise that Russia is irrefutably the aggressor. Although that is certainly the narrative of the West, Russia sees it very differently and is likely to defend any action taken by the West on the aggressor basis. (See: Ukraine – The Other Side).

Furthermore, in comparing the current crisis in Ukraine to Russia seizing German assets after the war to rebuild its infrastructure and economy, Secretary Summer overlooks the fact that Germany had unconditionally surrendered to the allies and had little choice in the matter. Germany’s reparation responsibilities were decided by the allies in Potsdam in 1945 in which a defeated Germany had no say whatsoever.

Iraq too, even though it was technically a negotiated peace agreement in which Iraq agreed to pull its troops out of Kuwait, to all intents and purposes it was surrender as Iraq’s only alternative to an agreement was to have coalition troops march on Bagdad.

In contrast, Russia and Ukraine are most likely to eventually reach an even-handed negotiated peace agreement, without either side being a decisive victor, and as such will require mutual agreement. Russia is unlikely to agree to terms that will require it to pay for Ukrainian reconstruction.  Any effort to unlawfully seize Russian assets will only exacerbate the instability in Eastern Europe and strengthen the Russia-China-Iran axis.

While this question will certainly be a spoke-in-the-wheel for any peace talks, there is yet another great impediment to peace.

Impediment to Peace

Another great impediment to any potential for peace is the Donbas region and Crimea. If Ukraine cedes those regions to Russia, President Zelensky will need to justify the war to the Ukrainians who sacrificed so much.  If Russia, on the other hand, decides to relinquish control of those regions (which is highly unlikely), then President Putin will have to answer to his people. This territorial standoff is what really creates the predicament for peace. Although one might imagine some compromise solution such as federalization or international condominium models, these would require continued collaboration and cooperation between the two countries – an improbable scenario in the near or far future.

These questions of territorial resolution and reparation responsibility will need to be adequately addressed for any peace proposal to be seriously considered.

An Integrated Solution for Peace

A possible approach towards peace is to consider a purchase agreement whereby Russia buys the Donbas region and Crimea from Ukraine. This would resolve the territory issue without either side having to surrender, while at the same time resolving the reconstruction costs for Ukraine with the proceeds of the sale.

There are historical precedents to this kind of arrangement that have stood the test of time and proven highly successful.

One example is the purchase of Alaska from what was then the Russian Empire in 1867. Although the purchase was initially met with criticism, as many Americans viewed Alaska as a barren and worthless land, with the discovery of gold in the 1890’s that perception rapidly changed.

Another example is the Louisiana Purchase in 1803, where France under Napoleon sold 827,000 square miles of territory west of the Mississippi to the United States for economic, political and strategic reasons.

To be sure, there would be a number of challenges to a solution based on a purchase agreement:

First, Ukraine considers Crimea and Donbas to be an integral part of its territory and any attempt to sell these regions to Russia would be seen as an act of betrayal by the Ukrainian people. Although it would behoove Ukraine to realize that it is unlikely that Russia will ever give up Crimea (for strategic reasons) or the Donbas region, and that an unjust peace might be better than a just war.

Furthermore, it is questionable whether Russia would be willing to pay the high price that Ukraine might exact for these territories. In addition, the conflict between the two nations goes beyond just the territorial dispute which an exchange of land for money might address, but extends to deep-seated political, economic, security and cultural differences.

A lasting and peaceful resolution to the conflict will require a comprehensive approach that on aggregate addresses all or most of the dimensions of the dispute. Although initially, a proposal to sell Crimea and Donbas to Russia might appear unlikely to be feasible or acceptable to both parties, an exploration of the idea might be the beginning of a more wide-ranging discussion that may trigger further creative approaches. It also might resolve two of the more thorny issues in the dispute – the Donbas and Crimea territory and who pays for damages in Ukraine.

Raphael Lapin is a recognized negotiation and dispute resolution specialist. He is also a scholar and keen observer of international conflict. He can be reached via his website www.lapinnegotiationservices.com