🔗 Share this article

The Russian central bank has declared it is seeking compensation amounting to $230 billion from the securities depository Euroclear. This move constitutes a direct response by the Kremlin regarding proposals to utilize immobilized Russian sovereign assets to support Ukraine.

The Legal Claim

According to accounts in local news outlets, the monetary authority filed a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

EU leaders will determine in the coming days on a proposal to use around €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a substantial loan to finance its military and financial stability.

Most of these funds, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Russian frozen financial reserves.

Divergent Legal Views

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 remains with Russia, even though it was immobilized in EU countries following the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the funds as theft. It has warned of reciprocal actions, such as confiscating EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key position in diplomatic talks, stated on X that Russia "will prevail in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

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

The clearing house refused to provide a statement on the new lawsuit. It has previously stated it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are not expected to recognize rulings from Russian courts, analysts anticipate Moscow to seek implementation in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be identified," commented a legal expert from an international firm.

European Safeguards

European authorities indicated they are working on steps to deter other nations from aiding any Russian lawsuits against EU companies. They are also designing protections to protect EU member states with assets in Russia from what they call "unlawful 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 frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would only be obligated to return the money if and when Russia consented to pay reparations for the immense destruction caused during the nearly four-year conflict.

Other Funding Ideas

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

Such a proposal, however, requires unanimity among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally important," she stated. "Furthermore, it delivers a clear signal that when you cause all this destruction to another nation, you have to pay for the rebuilding."