Ukraine has become aware of the possibility of raising $300 billion by selling reparations bonds to provide funding to defend itself against Russian aggression. Despite the support of the United States and the European Union trying to help Ukraine, the recently unfrozen $300 billion from the Russian Central Bank has not yet reached Kyiv.

According to Reuters, Ukraine is considering selling reparations bonds, which would be guaranteed by future claims against Russia for compensation for losses incurred during the war.

The amount of money is only possible if the bonds are purchased by the governments of the European Union and the United States. Although it has been noted that it would be more effective if Ukraine's Western partners provided more financial assistance, as Britain did last week, US President Joe Biden has not yet been able to get Congressional support for a new $61 billion aid package.

Reuters reports that the issuance of reparations bonds could avoid problems associated with attempts to confiscate Russian assets, as bondholders would not have contractual claims on the Kremlin's frozen reserves.

However, experts note that, as Russia may be reluctant to pay, reparations bonds are likely to be the only way to obtain funds to compensate for the damage.

Daleep Singh, chief global economist at PGIM Fixed Income, believes that Ukraine could structure the bonds in different tranches if Western countries do not plan to buy all the securities. This will allow governments to buy risky tranches, leaving less risky ones for ordinary investors.

The legal basis for issuing reparations bonds is the principle of "full compensation for damage caused by an internationally wrongful act." A precedent is the situation with Iraq, which was obliged to pay $52 billion in compensation after the invasion of Kuwait in 1990.

However, imposing its will on Russia will be more difficult, as it can veto UN Security Council resolutions. Nevertheless, the UN General Assembly has already identified the need for an international reparations mechanism.

According to the World Bank, the cost of rebuilding Ukraine after the war reached $411 billion by February last year.