The Cable

Even on Financial Front, Ukraine and Russia on Opposing Sides

This story has been updated.

As Ukraine's battle against separatists along the border with Russia intensifies, the conflict threatens to bleed the government's coffers dry. The IMF warned the government could be short $19 billion next year if fighting doesn't stop soon. Kiev could really use the money frozen in Swiss bank accounts that allegedly originated from its treasury but was allegedly stolen by the former Ukrainian president and his cronies. The only problem is that it could take years -- if ever -- to get the money back.

Ukraine's budget situation has deteriorated rapidly as the government has been forced to divert more and more resources to the military. The IMF warned Tuesday that if the conflict doesn’t end in the next few months, Ukraine will need a new bailout. "Risks loom large," the IMF said in a new report. Kiev would face a $19 billion government shortfall next year if fighting doesn't end soon.

The conflict is likely to only get more expensive, after recent setbacks against well-armed pro-Russia separatists. Ukrainian officials warned Tuesday that Russian forces had been seen in cities in the eastern part of the country, raising the prospect of direct confrontation with Russia in the crisis that began when Moscow annexed the Crimean peninsula in March. On Aug. 24, President Petro Poroshenko boosted Ukraine's military budget by $3 billion over the next three years -- a 50 percent increase -- in preparation for a protracted fight.

The situation also diverts attention from the new government's attempt to root out corruption and find money reportedly siphoned out of public accounts during the previous administration. In February, the Swiss government froze accounts, holding about $75 million, belonging to ousted President Viktor Yanukovych and 17 others, including his son. But none of it has returned to Kiev yet.

Although Yanukovych and his son Oleksandr, a dentist turned mogul, are widely suspected of corruption in Ukraine, proving that and getting the money back is another story. In February, Ukrainian and Swiss authorities opened investigations, but to force Switzerland and other jurisdictions to drain the frozen accounts into Kiev's treasury, they must prove the money's illicit nature in court.

A trove of documents dumped in a river near Yanukovych's lavish estate, Mezhyhirya, as he fled Ukraine should help investigators. Nonetheless, using contracts, receipts, and corporate documents to prove the assets were obtained illegally, rather than through legitimate businesses, is a long, painstaking process.

The United States and Britain dispatched experts to Ukraine in March after the new government took over to help it find assets and make a case. Kiev also reportedly asked the Swiss justice department for assistance. On Aug. 11, Vitaliy Yarema, Ukraine's prosecutor general, called in the International Center for Asset Recovery, a nonprofit specializing in corruption investigations. But even the experts acknowledge that their task is daunting.

Gretta Fenner said her Swiss-based center is helping Ukraine trace assets and build legal cases, which is challenging. Much of the money was taken in cash, making it harder to trace. And even if investigators find it and can prove that it was stolen, there's no guarantee that the countries harboring the money will return it. Switzerland has gone to great lengths in recent years to shed its image as a safe haven for the spoils of criminals and despots by helping foreign governments investigate corrupt leaders accused of stashing their loot in Swiss banks.

Other offshore financial centers like Bermuda, Singapore, and the British Virgin Islands are not necessarily as cooperative. Strong diplomatic ties are usually a prerequisite to legal assistance, so that means anything Yanukovych took with him to Russia likely isn't coming back.

"We assume that a lot of money is in Russia, and you can assume that the Russians are not being cooperative with anyone at the moment," Fenner said from Basel, Switzerland.

Fenner advised Ukrainian officials to focus on the "cases that lead to jurisdictions that have helped in these investigations in the past." Still, she said the process -- even if successful -- will likely take years.

"Anything under three or four years is going to be radically fast in comparison with past investigations," Fenner said.

For example, the frozen Swiss accounts of deposed Arab Spring leaders, such as Zine el-Abidine Ben Ali (Tunisia) and Hosni Mubarak (Egypt), remain full while investigations launched in 2011 continue. Swiss banks froze accounts belonging to former Haitian dictator Jean-Claude "Baby Doc" Duvalier in 1986, and the money is only now in the process of being returned to Haiti. According to the Swiss government, it has returned almost $2 billion to countries chasing stolen assets. But that figure pales in comparison with how much was taken. Ukrainian officials estimated that Yanukovych and his associates made off with as much as $100 billion.

Without any prospect of getting the stolen assets back anytime soon, Ukraine will likely look to the IMF and its Western allies to fill the budget gap that deepens as the conflict in eastern Ukraine inflicts more and more damage to the economy. The IMF agreed in March to give the country a $17 billion loan, released in tranches, combined with some $10 billion more promised in bilateral aid from individual countries.

Ukraine got the first $3 billion portion of IMF money in May, but military spending and debt repayments are tearing through it. Finance Minister Oleksandr Shlapak said Aug. 20 that the IMF should speed up disbursements because the country needs more money faster to make up a budget shortfall of 5 percent of GDP. If the IMF rejects Shlapak's request for more money, Kiev may soon have to pass the hat around to its Western supporters.

Photo by Alexander KHUDOTEPLY/AFP/Getty Images

The Cable

Obama Hints at Legal Rationale for Airstrikes in Syria


This story was updated on Aug. 28, 2014. 

President Barack Obama made three things clear at a news conference on Thursday: A military strike on Islamic State fighters in Syria is not imminent; the commander in chief doesn't need Congress's permission to act; and if the United States strikes, it'll be in the nation's self-defense.

It's that last point that may be the most important, as administration officials are grappling with a legal justification for launching airstrikes inside a country whose government hasn't explicitly given permission to do so. "I don't see any scenario in which Assad is able to bring peace and stability" to areas controlled by the Islamic State in Syria, Obama said on Thursday, Aug. 28, effectively making the argument that the government of Syrian President Bashar al-Assad cannot contain the terrorist threat.

The United States has long argued that an attack on non-state militants like the fighters of the Islamic State in Syria can be legally justified if they pose a threat to U.S. interests and nationals, and the government in the country where they operate, in this case Syria, either can't or won't prevent them from committing terrorist attacks. But that legal reasoning remains deeply controversial, and has never been accepted by the United Nations and many of Washington's allies.

As for the role of lawmakers authorizing military action in Syria, Obama said that "consultations" with Congress "will continue to develop so the American people are part of the debate." But he has no immediate plans to seek explicit congressional authorization, as he last year said he'd do before any attack on Syria in response to its use of chemical weapons. Furthermore, Obama said it is premature to present a military proposal to Congress because one doesn't exist.

"We don't have a strategy yet," Obama said. Responding to press accounts that suggested a military strike might be imminent, the president said: "Folks are getting a little further ahead of where we're at than where we currently are."

Those folks include members of the president's own party. On Wednesday, a bipartisan group of lawmakers consisting of Reps. Barbara Lee of California, Walter Jones of North Carolina, and James McGovern of Massachusetts called on Congress to weigh in on whether to authorize military force for America's war with the Islamic State. "These are serious matters that require congressional debate and a vote on whether to authorize them," said their letter.

Some Republicans, including Sen. Bob Corker, the ranking member of the Senate Foreign Relations Committee, have also said that Congress must authorize an expanded military campaign against the Islamic State.

Still, Obama's assurance that no request for the authorization of force is imminent will come as a relief to members of Congress in both parties reluctant to weigh in on a politically risky and sensitive issue months before the midterm elections. "It's pretty widely understood that this isn't a vote people are dying to take up," said a House leadership aide.  

There has been little legal, or political, controversy surrounding Obama's decision to bomb Islamic State fighters and positions in Iraq, where the government pleaded for American help to counter the terrorist group previously known as ISIS and ISIL. Indeed, Pope Francis, when asked whether he approved of the American air campaign, said, "In these cases where there is an unjust aggression, I can only say this: It is licit to stop the unjust aggressor" -- though he did not endorse airstrikes.

But international legal experts say the United States has an uphill battle convincing many of its allies that there is a legal rationale for extending strikes into Syria.

The U.N. Charter offers two major paths to military action. A government is permitted, under Article 51, to use force against an armed aggressor in self-defense. It can also invite foreign powers to help it defend itself, as Iraq has done. The U.N. Security Council can, under Article 42, authorize a military intervention.

But those roads may be blocked for the time being.

The Syrian government has not approved American air power. Syrian Foreign Minister Walid Muallem warned that Bashar al-Assad's regime would consider American military intervention in its territory an "act of aggression" unless it coordinated its activities with Damascus -- a condition Washington has rejected. And Russia -- while no friend of the Islamic State -- may not be inclined to approve a Security Council resolution granting Washington a blank check in Syria.

"If … there are plans to combat Islamic State on the territory of Syria and other countries, it is indispensable that it is done in cooperation with legitimate authorities [there]," Russian Foreign Minister Sergei Lavrov said on Monday, Aug. 25. "[The West] will soon have to choose what is more important: a [Syrian] regime change to satisfy personal antipathies, risking deterioration of the situation beyond any control, or finding pragmatic ways to unite efforts against the common threat."

Ryan Goodman, professor of international law at New York University and co-editor in chief of the national security blog Just Security said American airstrikes without a Syrian invitation or a U.N. mandate may prove "problematic."

The United States has long argued that it has the right to "use force on the territory of another state that is hosting a nonstate actor" threatening the United States, Goodman said. But a decision to act has been considered controversial, even by many of America's allies and the United Nations. Even by U.S. standards, a decision to use force generally requires a finding that the state is unwilling or unable to take action to confront armed groups on its territory. "The strange quality of the current situation is that the Syrians are saying they are willing and able to cooperate with us."

The case illustrates the constraints of the U.N. Charter -- which was designed to mediate differences among states -- in confronting military challenges from freelance Islamist extremists. U.N. Secretary-General Ban Ki-moon's spokesman, Stéphane Dujarric, hinted at the dilemma, saying Tuesday that Ban is concerned "about the threats that ISIS and ISIL pose and obviously we would hope that a solution is found within the bounds of international law."

Across party lines, American presidents have taken a broad view on the scope of military action allowed for self-defense. In the wake of the 9/11 terrorist attacks, the United States has intervened in Iraq without the Security Council's explicit approval. It has also struck alleged terrorist targets in Somalia, Pakistan, and Yemen, sometimes without the local government's consent.

This summer, the United States justified seizing a suspected terrorist, Ahmed Abu Khattala, in Libya on self-defense grounds, saying a "painstaking investigation" linked him to the September 2012 murder of J. Christopher Stevens, then the U.S. ambassador to Libya, and three other Americans. In a letter to the U.N. Security Council, Samantha Power, the U.S. ambassador to the U.N., said Abu Khattala "continued to plan further armed attacks against U.S. persons."

"The measures we have taken to capture Abu Khattala in Libya were therefore necessary to prevent such armed attacks, and were taken in accordance with the United States' inherent right of self-defense," she added. "We are reporting these measures to the Security Council in accordance with Article 51 of the Charter of the United Nations."

Ashley Deeks, a former State Department lawyer now at the University of Virginia's School of Law, said the Obama administration has yet to articulate the legal basis for bombing in Syria. But she said the self-defense justification is most likely what it will cite, what she called "anticipatory self-defense," that is, countering an imminent threat against American citizens. In a post on the blog Lawfare, Deeks outlined a list of potential legal rationales she believes the United States could use to justify military action.

After the Islamic State beheaded James Foley, an American journalist, the group threatened to kill another American journalist, Steven Sotloff, and to attack Americans "in any place" if the United States continues airstrikes against its fighters. "We will drown you in blood," the group stated in a video.

Deeks said it is unclear how much evidence the United States has compiled on potential threats by the extremist movement against American targets. But she believes the Obama administration could deflect Syrian claims that is able to stop the Sunni militants. Syria, she said, "looks like a country that is willing but unable. They're getting their asses kicked by ISIS."

Kevin Jon Heller, a professor of international law at the University of London, said the "clearest routes to legality don't seem to be evident" in the case of Syria.

"If the Security Council adopted a resolution [authorizing airstrikes], that would solve everybody's problem," he said, adding that Americans "should not be holding [their] breath. Russia and China have rejected anything in the past regarding Assad."

The case for self-defense has its own weaknesses.

The doctrine does not allow countries to use force to punish acts of terrorism that have already occurred, but rather to stave off significant armed attacks, Keller said. And it requires states to respond proportionately.

"I haven't seen enough evidence to say that the bombing of Syria would be a necessary and proportionate response," he said. "The killing of James Foley, however horrible, is not supposed to make it open season on another country's sovereignty. I wouldn't say there is no route to legality with U.S. airstrikes, but it's not clear the facts support any strong self-defense arguments, particularly as non-Americans would understand the legal principle."

Matthew Waxman, a law professor at Columbia University who served in George W. Bush's administration, said he needed more evidence to judge definitively whether the United States has a case for airstrikes. But on the face of it, he said, "justification for some military action is strong.

"When it comes to terrorist threats, the United States tends to claim a broader right of self-defense than many other countries recognize, but it will find a lot of sympathy in this case.

"It will likely justify strikes primarily in terms of threats to American nationals, personnel, and deployed forces, but it will also probably cite the ongoing Syrian civil war, the horrors perpetrated by Assad, and protection of Iraq as additional factors. This would be a stronger claim than the United States had last year when it was considering strikes against Syria for chemical weapons use because the threats to the United States are more direct and clear."

Shane Harris and John Hudson contributed to this report. 

Correction: A previous version of this article incorrectly suggested that the U.N. Charter could provide a legal basis for a U.S. attack against the Islamic State if the U.S. president determines Syria is unwilling or unable to do it.  The United States has long asserted it possesses such a right, but the U.N. charter does not endorse it.

Photo by Sean Gallup/ Getty Images