🔗 Share this article

The Russian central bank has stated it is seeking compensation totaling $230 billion from the securities depository Euroclear. This legal step is a clear response from the Kremlin against plans to use immobilized Russian sovereign funds to aid Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

European Union officials are set to determine later this week regarding a plan to leverage approximately €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a large loan to finance its military and financial stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the primary keeper for the Russian immobilised financial reserves.

Dispute on Ownership

European Union authorities have argued that their proposal is on solid legal ground. They argue is based on the principle that title of the sovereign wealth still belongs to Russia, despite being it was frozen in European countries following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any utilization of the funds as illegal appropriation. It has threatened reciprocal measures, including seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious attack on the right to ownership and the global financial system created by the United States."

Euroclear refused to provide a statement on the new legal action. The institution has previously stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are not expected to recognize judgments from Russian tribunals, analysts anticipate Moscow to seek implementation in nations with stronger relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such holdings can be located," commented a lawyer from an international firm.

EU Countermeasures

EU officials indicated they are working on steps to discourage other countries from assisting any Russian lawsuits against EU entities. They are also crafting protections to shield EU countries with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay unaffected.

Kyiv would only be obligated to repay the loan in the event that Russia agreed to pay compensation for the immense destruction inflicted during the ongoing war.

Alternative Proposals

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

This alternative move, nevertheless, demands unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally significant," she remarked. "Furthermore, it delivers a powerful message that if you cause all this destruction to another nation, you must pay for the rebuilding."