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The Financial Times published an op-ed by chief economist at German bank LBBW, Moritz Kraemer, calling for the creation of "Ukraine Reconstruction Bonds" backed by either the interest on frozen Russian assets, the European Union or the World Bank.
"Investment in Ukraine’s recovery and reconstruction cannot wait until the war is over," Kraemer wrote in the op-ed piece. "In fact, the evidence is that reconstruction finance needs to be front-loaded — the need exists now."
He said the Ukrainian government can't issue bonds on its own because the war is already affecting its foreign currency rating, which is categorized as "CCC" at S&P Global, so the bonds will need some form of backing.
"If Ukrainian reconstruction bonds (URBs) are secured by commitments from top-rated entities, such as the EU or the World Bank, they could be marketed to institutional and retail investors alike," Kraemer wrote.
He said such bonds could be backed by the EU's Ukraine Facility, a 50 billion-euro fund comprised of loans and non-repayable funds for the reconstruction of Ukraine to be disbursed by 2027.
They could also be partly secured by "a windfall tax on the profits of Euroclear, the securities depository where much of the frozen foreign reserves of Russia’s central bank sit. In the first half of 2023 alone, Euroclear earned more than 1.7 billion euros of interest on Russia’s sanctioned assets."
While the EU and the US are debating whether they can legally use the hundreds of billions of euros seized from Russia, mainly from the country's central bank, to pay for the reconstruction of Ukraine, Kraemer says legal experts generally agree the interest on the assets does not legally accrue to Russia.
"URBs are a win-win proposition," he wrote. "First, Ukraine benefits by receiving necessary reconstruction funds more rapidly. Deploying resources quickly reduces the economic and social fallout from the war. EU governments also benefit from propping up what has turned out to be the key frontline ally standing up for our joint values."
