🔗 Share this article

The Russian central bank has announced it is seeking compensation totaling $230 billion against the securities depository Euroclear. This action constitutes a direct response from the Kremlin regarding proposals to utilize frozen Russian sovereign assets to aid Ukraine.

The Financial Lawsuit

According to reports in local news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This figure is equivalent to the stated $230 billion demand.

EU leaders are set to determine later this week regarding a proposal to leverage approximately €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a substantial loan to finance its defence and financial needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the main custodian for the Kremlin's immobilised financial reserves.

A Clash Over Legality

EU officials have maintained that their proposal is on solid legal ground. Their position rests on the principle that title of the state assets remains with Russia, even though it was immobilized in European jurisdictions shortly after the full-scale invasion of Ukraine.

The Russian government, however, has called any utilization of the assets as theft. It has threatened retaliatory measures, such as confiscating European corporate holdings within Russia.

Kirill Dmitriev, who has assumed a key position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a vicious assault on the right to ownership and the international reserves system established by the United States."

The clearing house declined to comment on the new legal action. The institution has in the past noted it is contending with more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While judges in European nations are unlikely to recognize judgments from Russian tribunals, analysts expect Moscow to seek enforcement in nations with closer ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such holdings can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are working on steps to deter other nations from aiding any Russian legal action against EU companies. They are also designing protections to shield EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain unaffected.

Ukraine would solely be obligated to repay the money in the event that Russia consented to pay compensation for the vast damage inflicted during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This involves joint EU debt issuance to secure a loan, backed by unused funds within the European budget.

Such a proposal, however, requires unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also delivers a clear message that when you cause all this damage to another nation, you have to pay for the rebuilding."