🔗 Share this article

Russia's monetary authority has declared it is seeking damages amounting to $230 billion against the securities depository Euroclear. This legal step is a clear warning from the Kremlin against proposals to utilize frozen Russian state assets to support Ukraine.

The Legal Claim

According to reports in local state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials are set to determine in the coming days regarding a proposal to leverage around €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a substantial loan to fund its military and financial stability.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the main custodian for the Kremlin's frozen financial reserves.

Dispute on Ownership

European Union officials have maintained that their plan is legally sound. They argue rests on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in European countries shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any use of the funds as illegal appropriation. It has threatened reciprocal measures, including seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its assets. He warned that the European Union, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious attack on property rights and the global financial system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. It has in the past stated it is facing over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are unlikely to recognize judgments from Russian courts, experts anticipate Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant assets can be located," commented a legal expert from an NSP law firm.

European Safeguards

EU officials indicated they are developing measures to deter other nations from aiding any Russian legal action against EU companies. Additionally, they are crafting protections to protect EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would only be obligated to return the loan if and when Russia agreed to pay reparations for the immense damage caused during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This entails joint EU borrowing to fund a loan, using unused funds within the EU budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it sends a clear signal that when you do all this destruction to another country, you have to pay for the reparations."