🔗 Share this article

The Russian central bank has announced it is pursuing damages totaling $230 billion from the securities depository Euroclear. This move is a direct warning by the Kremlin regarding plans to utilize frozen Russian sovereign assets to support Ukraine.

The Legal Claim

Based on reports in local news outlets, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

European Union officials will decide in the coming days on a proposal to leverage around €210 billion in frozen Russian assets. The proposal involves providing Ukraine with a substantial loan to fund its military and economic needs.

Most of these assets, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Russian frozen financial reserves.

Divergent Legal Views

EU officials have maintained that their proposal is legally sound. They argue is based on the principle that ownership of the state assets still belongs to Russia, despite being it was frozen in European jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has labeled any utilization of the funds as theft. It has warned of retaliatory measures, including confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in peace negotiations, stated on X that Russia "will win in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements interpreted as an effort to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious attack on property rights and the international reserves system created by the United States."

Euroclear declined to comment on the latest lawsuit. It has previously stated it is contending with more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are not expected to enforce judgments from Russian courts, experts expect Moscow to pursue implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant assets can be identified," stated a legal expert from an international firm.

EU Countermeasures

EU officials said they are developing steps to discourage other nations from aiding any Russian lawsuits against EU companies. They are also crafting safeguards to protect EU countries with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain untouched.

Ukraine would solely be required to return the loan in the event that Russia agreed to pay compensation for the immense destruction inflicted during the nearly four-year war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for funding Ukraine. This entails common EU debt issuance to secure a loan, backed by unused funds within the EU budget.

This alternative move, however, demands full agreement among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible solution" 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 stated. "Furthermore, it sends a powerful signal that when you cause all this damage to another country, you must pay for the reparations."