🔗 Share this article

Russia's monetary authority has announced it is claiming damages valued at $230 billion against the securities depository Euroclear. This legal step constitutes a clear response from the Kremlin regarding proposals to use immobilized Russian sovereign funds to aid Ukraine.

The Legal Claim

According to accounts in Russian state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This figure corresponds to the aforementioned $230 billion demand.

EU leaders will decide 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 defence and economic needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Russian frozen sovereign wealth.

A Clash Over Legality

EU officials have argued that their proposal is on solid legal ground. They argue is based on the fact that title of the sovereign wealth still belongs to Russia, despite being it was frozen in European countries following the full-scale military offensive of Ukraine.

Moscow, however, has labeled any use of the assets as illegal appropriation. Authorities have warned of reciprocal actions, such as confiscating EU corporate assets within Russia.

Kirill Dmitriev, who has assumed a prominent role in diplomatic talks, stated on X that Russia "will prevail in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements seen as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious assault on property rights and the global financial system established by the United States."

Euroclear refused to provide a statement on the new lawsuit. It has in the past stated it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in European nations are unlikely to recognize rulings from Russian courts, experts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant holdings can be located," commented a lawyer from an international firm.

European Safeguards

EU officials said they are developing measures to discourage other nations from assisting any Russian lawsuits against European companies. They are also designing safeguards to shield EU countries with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under 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. Critically, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would solely be obligated to return the loan if and when Russia agreed to pay compensation for the vast destruction inflicted during the nearly four-year war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for financing Ukraine. This involves joint EU borrowing to secure a loan, using unused funds within the European budget.

Such a proposal, nevertheless, requires full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also important," she stated. "Furthermore, it sends a clear signal that if you do all this destruction to another nation, you have to pay for the rebuilding."