SOCIAL BONDS: A NEW VARIANT OF ‘LEND-LEASE’ TO REBUILD UKRAINE
International supporters of Ukraine are increasingly reluctant to fund what will undoubtedly be a massive reconstruction effort for the country — the amount now increasing into the hundreds of billions to possibly over a trillion dollars. With the ongoing targeting of civilian residential areas and critical infrastructure by Russian forces, and almost certain refusal by Western taxpayers to fund the total costs of reconstruction, alternative ways must be found. This includes efforts to identify multinational approaches to raise the necessary reconstruction funds.
Various ideas are emerging about mobilising funds. Several countries are moving forward now with the legal and financial arrangements to facilitate ‘repurposing’ (confiscating) assets currently frozen under sanctions regimes. These efforts will require considerable time (delaying reconstruction efforts) as they face legal constraints under existing international law and confront legal challenges by the oligarchs set to lose assets in different national jurisdictions. Even if these legal obstacles can be surmounted, political challenges remain. Some countries fear that Russia will retaliate by seizing their assets in Russia or that Russia will default on its obligations to foreign investors and bondholders. This paper, in contrast, examines the modalities of a promising ‘social bond’ alternative financial innovation instrument.