🔗 Share this article

The Russian central bank has declared it is claiming damages amounting to $230 billion from the securities depository Euroclear. This action constitutes a direct response by the Kremlin regarding proposals to utilize frozen Russian state funds to support Ukraine.

The Substantial Demand

According to reports in Russian state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

European Union officials will determine later this week regarding a plan to use around €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a large loan to finance its military and economic stability.

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the main keeper for the Russian frozen sovereign wealth.

Dispute on Ownership

European Union officials have maintained that their plan is legally sound. Their position rests on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in European countries following the 2022 invasion of Ukraine.

Moscow, in contrast, has called any use of the funds as theft. Authorities have warned of retaliatory measures, including seizing European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements seen as an attempt to create division between Europe and the United States, the official described the assets plan as "a vicious attack on the right to ownership and the global financial system established by the United States."

Euroclear declined to provide a statement on the latest lawsuit. It has in the past noted it is facing over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are unlikely to enforce judgments from Russian courts, experts expect Moscow to seek implementation in countries with closer relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be identified," commented a legal expert from an NSP law firm.

European Safeguards

European authorities indicated they are developing steps to discourage other nations from assisting any Russian lawsuits against European companies. Additionally, they are crafting safeguards to shield EU countries with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would solely be obligated to repay the money if and when Russia agreed to pay compensation for the immense destruction inflicted during the ongoing conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for funding Ukraine. This entails joint EU borrowing to secure a loan, using unused funds within the European budget.

Such a proposal, however, demands unanimity among all 27 member states. Hungary's government, considered aligned with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also important," she stated. "It also sends a clear message that when you do all this destruction to another nation, you must pay for the reparations."