🔗 Share this article

Russia's monetary authority has announced it is pursuing compensation valued at $230 billion against the securities depository Euroclear. This legal step constitutes a direct response by the Kremlin regarding proposals to use frozen Russian sovereign assets to aid Ukraine.

The Substantial Demand

Based on reports in Russian news outlets, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

European Union officials are set to determine later this week regarding a plan to leverage approximately €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a substantial loan to finance its defence and financial needs.

Most of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the primary custodian for the Russian immobilised financial reserves.

A Clash Over Legality

European Union officials have argued that their proposal is on solid legal ground. Their position is based on the fact that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European jurisdictions shortly after the 2022 military offensive of Ukraine.

Moscow, in contrast, has called any use of the funds as theft. Authorities have warned of reciprocal measures, including confiscating European corporate holdings within Russia.

Kirill Dmitriev, a figure who has taken on a prominent role in diplomatic talks, stated on a social media platform that Russia "will win in court" and retrieve its funds. He warned that the EU, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a severe assault on the right to ownership and the international reserves system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. The institution has in the past noted it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are not expected to recognize rulings from Russian tribunals, experts expect Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that relevant assets can be located," stated a legal expert from an international firm.

EU Countermeasures

European authorities indicated they are developing measures to deter other nations from assisting any Russian lawsuits against EU companies. Additionally, they are crafting safeguards to protect EU countries with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay untouched.

Kyiv would solely be required to repay the money if and when Russia agreed to pay compensation for the immense destruction caused during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for financing Ukraine. This entails common EU debt issuance to secure a loan, using unused funds within the European budget.

This alternative move, nevertheless, demands full agreement among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it delivers a clear signal that when you do all this destruction to another country, you must pay for the rebuilding."