Leveraging Seized Russian Assets for Ukraine💙💛
Paying forward twofold, having the cake and eating it too
Since the war in Ukraine began on February 24th 2022, Western governments have seized hundreds of billions of dollars worth of Russian assets. What if we could put these assets to work to give back to Ukraine? In this blog post, I propose a structure to give back to Ukraine by acquiring, managing and profiting from seized Russian assets.
Rationale
Russia’s invasion of Ukraine is an absurdity in the 21st century. Untold destruction has been unleashed on this country which, like all of us, is only striving to make a better future for its children. Ukrainians lost their homes, their livelihoods, their friends, and their families. Although it will sadly never be possible to replace those that were lost, we have a duty to help Ukraine in stopping this aggression and rebuilding their beautiful country.
You can support Ukraine by donating money, crypto, or equipment to United24, the official way of contributing to Ukraine’s defense and survival.
The idea
The idea is really simple; acquire seized Russian assets, manage the assets, and give the proceeds to Ukraine.
Immediately after the war in Ukraine started in February 2022, Western countries were quick to impose sanctions on Russia and its elites. In total, hundreds of billions of dollars worth of assets were seized. Among the assets seized are some liquid assets like securities, gold, or simply money, but also some illiquid assets, like real estate, yachts, jets, cars, art, companies… These assets may have belonged to the Russian government itself or oligarchs. Overwhelmingly, those assets seized from the oligarchs are luxury items, not accessible to any regular member of the public.
Some governments have already begun promising to sell these confiscated assets and give the proceeds to Ukraine, to fund their defense and reconstruction efforts. Although the liquid assets can easily be sold on the market or outright transferred to Ukraine, those illiquid assets pose a problem. They need to be maintained. You can’t just park a plane or yacht and forget about it. For instance, a general rule of thumb for a yacht is that the owner should expect to spend around 10% of the yacht’s value per year just to maintain and run it. So if you have a $100M yacht, you will spend roughly $10M per year just to maintain it. For Western governments, the incentive will be to sell these assets as soon as possible, at any price point.
Someone will have to buy these jets and yachts and you can guess who that will be, another billionaire that will inevitably get a good deal on a yacht. Yachts can take years to sell, given the fact that there might only be a handful of potential buyers in the world at any given point. Combine that with the fact that there will be dozens of them for sale at the same time. I find he idea of subsidized yachts quite disturbing and I want to avoid this scenario just as much as I want to help Ukraine.
So why don’t we just buy it ourselves? Why don’t we commercialize these assets ourselves and give the profits to Ukraine? The fact that there are jet rental, luxury car rental or yacht rental businesses out there is enough evidence to show that it could work.
Of course, crowd-funding millions or tens of millions of dollars is a hard task, but I believe it can be done, for two reasons. Firstly, some viral projects have been able to raise such sums, from tens of thousands of individuals in just a few days. One good example is ConstitutionDAO, a blockchain-based project that raised $47M in a week to buy an original copy of the US Constitution. When was the last time you heard a non-profit raise that much in such a short span of time? Secondly, any amount that is raised can actually be leveraged by taking out a loan. As long as the cash down amount for the purchase is larger than the potential decline in value of the asset and the organization has enough to make minimum payments, any reasonable lender should be fine with financing such a project, given there exists an asset as collateral, which is the whole point. Realistically, it is not excluded that some partners might profit off of this, as long as a good portion of proceeds actually goes towards the good cause.
This proposal is not meant to prevent Ukraine from receiving any funds right now, in fact, I believe the impact of this proposal will be twofold. By buying confiscated assets, Ukraine will be able to receive the money used to buy the assets from western governments AND the profits generated from commercializing these assets. Having the cake and eating it to so to speak. Realistically, Ukraine might receive these funds even sooner than if the assets were simply put on the market. There aren’t many buyers for yachts worth several hundred million dollars, much less dozens of them, and it may take years to find said buyers.
One important point is that even if this project gets outbid on every single purchase attempt, it is still a big win for Ukraine. By ensuring that other buyers pay a fair market value, we are indirectly providing millions more to Ukraine just by our mere presence on the market as serious buyers. Even if someone buys a 20-million yacht for 12 millions, if we were able to raise the base price by 2 millions, that’s still an immense indirect contribution to people that need these funds. Even if all our funds are refunded in the end, just by participating in this market, we could already achieve so much.
The best case scenario is this; participating on the market, succeeding in purchasing some assets, commercializing the assets and provide a long-term income stream for Ukraine. Eventually, assets may be sold again, which could mean a second large donation to Ukraine, an asset could provide more than 2x its value over a few years. Monetarily, Western countries acquired the assets for free, but in reality, Ukraine paid the ultimate price. It would really be cruel to have these assets transferred from a corrupt oligarch to a slightly less unethical, Western billionaire.
The logistics of such a project would be complicated, but not impossible. There needs to be a legal entity that holds the funds, a non-profit that will be able to represent the project internationally for the purchase of assets. An entity that can deal with banks, insurance companies, provide payments to employees and contractors… There are legal requirements that must be met, which are much more complicated than just a group of internet friends buying an old piece of paper.
Given all of this, I believe that a DAO could be an interesting way of acquiring the funds and providing governance to the project. ConstitutionDAO has shown that it is much easier to raise astronomical sums through crypto than through conventional means. There are billions out there in cryptocurrencies that are currently accomplishing absolutely nothing. Billions in digital gold that people have literally no use for.
What is a DAO
A Decentralized Autonomous Organization (DAO) is essentially a big smart contract. It’s a piece of code that is embedded into the blockchain, meaning it can’t be tampered with and doesn’t need a central authority to manage. Participants in the DAO own tokens specific to the organization that enable them to vote or take actions as defined in the contract.
A DAO in this case would serve as an interface between donors’ cryptocurrency and the real-world implications of this project. Donors would pool their Ether for instance and receive a proportional amount of project-specific tokens in exchange. These tokens are their voice in the project. Every time a decision needs to be taken, like which asset to buy, for how much, and how to administer them, the DAO will take a vote. The non-profit will have to carry out the decisions taken by the token holders.
Conclusion
In conclusion, I think it is our obligation to stand up to Russia’s aggression and support Ukraine as much as we possibly can. This war is unjust and unwarranted. What we can realistically do is support Ukraine with our wallets. I believe that utilizing seized assets for the good of Ukraine will be a force multiplier. Not only can we give them the value of these assets by purchasing them, we can also commercialize them and donate the proceeds to Ukraine. I believe that this long-term project is very valuable as it will compound through the years. While I hope support never fades, this solution might provide support for years to come.
If you wish to implement this idea, please do. It will be my pleasure to participate as much as I can. I want Ukraine to succeed. Slava Ukraini!
