🔗 Share this article

The Russian central bank has stated it is pursuing damages amounting to $230 billion against the financial institution Euroclear. This move represents a clear warning from the Kremlin regarding plans to utilize immobilized Russian state assets to support Ukraine.

The Legal Claim

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

European Union officials are set to decide later this week on a proposal to leverage around €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a substantial loan to fund its defence and financial needs.

Most of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian immobilised financial reserves.

A Clash Over Legality

EU officials have argued that their proposal is on solid legal ground. Their position is based on the principle that ownership of the sovereign wealth still belongs to Russia, despite being it was frozen in European countries shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any use of the assets as theft. Authorities have warned of reciprocal measures, including confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in peace negotiations, stated on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the proposal 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 latest lawsuit. The institution has previously noted it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in European nations are not expected to recognize rulings from Russian courts, analysts expect Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant holdings can be identified," stated a legal expert from an NSP law firm.

European Safeguards

EU officials indicated they are developing steps to discourage other nations from assisting any Russian legal action against European entities. They are also crafting safeguards to protect EU member states with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay untouched.

Ukraine would solely be required to return the loan in the event that Russia agreed to pay reparations for the vast damage caused during the nearly four-year war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This involves joint EU debt issuance to fund a loan, using unused funds within the European budget.

Such a proposal, however, requires unanimity among all 27 member states. Hungary's government, viewed as aligned 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 solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it is not drawn from our public funds, which is equally important," she stated. "It also delivers a powerful signal that when you do all this damage to another nation, you have to pay for the reparations."