When one of the authors was young, on a sunny day in Mariupol, Ukraine, the square in front of the Mariupol Drama Theater building was filled with families. Today, the family members are all dead, injured, or refugees. The building is in ruins, along with other facilities, bridges, roads, electrical and water lines, and much of the infrastructure of a once prosperous modern state.

Russia must pay for this destruction. 

When Russia's military is finally thrust out of Ukraine, reparations must be paid to compensate partially for the deliberate devastation in Ukraine. Such reparations are a moral obligation. But more to the point, the cost to Russia must be great enough to make other tyrants think twice before invading their neighbors.

Initial estimates are that it will cost at least $85 billion to rebuild Ukraine's private and public infrastructure. In addition, there are the indirect costs resulting from the war, including a sharp decline in economic growth, a long-term reduction in investment, and the need for additional defense and social spending. As a result, the nonhuman cost may come to $500 billion.

Of course, as the war continues, this cost will grow. And none trust the Russians will voluntarily pay just reparations.

One reparations option is for the international community to adopt the process that required Saddam Hussein to pay for the devastation in Kuwait after Iraq's 1990 invasion. After Iraq was forced out of Kuwait, Iraq's oil export earnings were paid into an account at the New York Federal Reserve. The Fed transferred a portion of these oil revenues — initially 30%, but gradually reduced to 3% — to Kuwait as reparation. The last payment of the $52.4 billion reparations was made earlier this year.  

A similar system could be employed to make Russia pay for the damage it has inflicted on Ukraine. After the war ends, Russia would be allowed to return to exporting its energy products only if its export revenues are deposited with a non-Russian financial authority. This authority would ensure that a portion of these revenues is transferred as reparations to Ukraine before the remainder is released to Russia.

Since Europe dominates Russia's energy exports, it should be able to enforce sanctions if the European states are unified in their demands. And the pressure on Russia to accept this reparations system or face catastrophic economic decline will be strong.

There are at least two critical issues to be resolved. First, which financial authority should be responsible for receiving export revenues, paying Ukraine, and distributing the remainder to Russia? The United Nations should probably be rejected based on the widespread perception of corruption in its management of the oil-for-food program in Iraq. Since most of Russia's energy exports go to Europe, the European Central Bank, located in Frankfurt, Germany, might be the best choice with its reputation for probity and competency.  

But then, what proportion of Russia's energy export earnings should be transferred to Ukraine as reparations? Set the rate too low, and reconstruction could take a century or more. But too high a rate will motivate large-scale smuggling. Since Russian oil exports in violation of sanctions are currently selling at roughly a 30% discount, an appropriate rate might be 20%.

If Russia had not invaded Ukraine, its energy exports would have reached about $160 billion, with Europe accounting for almost 56% of this amount. All things being equal, and assuming a consistent oil price for the sake of simplicity, a 20% reparation rate would give Ukraine about $20 billion a year.

At this rate, based on current estimates of destruction in Ukraine, it would take almost five years to pay the principal and interest for the restoration of Ukraine's infrastructure. It would take another 25 years to compensate Ukraine fully for the indirect harm mentioned above.

In view of the horrific violence that Russia has inflicted on the people of Ukraine, these reparations, based on the Iraq model, seem far too little and too late. However, since there is no international court that can hold Russia responsible for its atrocities, and the free world is not willing to risk a wider war to enforce its demands, sanctions that provide a substantial stream of reparations to rebuild Ukraine's nonhuman infrastructure while injuring Russia economically might be the best practicable option.  

Alex Nikolsko-Rzhevskyy and Frank R. Gunter (frg2@lehigh.edu) are Professors of Economics at Lehigh University.