🔗 Share this article

Russia's monetary authority has announced it is seeking damages totaling $230 billion against the securities depository Euroclear. This legal step is a clear response by the Kremlin regarding plans to use immobilized Russian sovereign funds to aid Ukraine.

The Substantial Demand

According to reports in local state media, the central bank filed a claim last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

European Union officials are set to decide later this week on a plan to use approximately €210 billion in immobilized Russian state funds. The proposal involves providing Ukraine with a large loan to finance its military and economic needs.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian frozen sovereign wealth.

Divergent Legal Views

EU authorities have maintained that their proposal is legally sound. They argue is based on the principle that title of the state assets remains with Russia, despite being it was frozen in European jurisdictions following the 2022 military offensive of Ukraine.

Moscow, however, has labeled any utilization of the funds as illegal appropriation. It has warned of reciprocal actions, such as seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in peace negotiations, wrote on X that Russia "will win in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

With statements seen as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe assault on the right to ownership and the global financial system created by the United States."

The clearing house refused to comment on the new lawsuit. The institution has previously noted it is contending with over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

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

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such holdings can be identified," commented a legal expert from an international firm.

European Safeguards

EU officials indicated they are working on steps to discourage other nations from assisting any Russian lawsuits against European entities. Additionally, they are designing protections to shield EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

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

Kyiv would only be required to repay the money in the event that Russia consented to pay reparations for the immense damage caused during the nearly four-year war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for financing Ukraine. This entails joint EU borrowing to secure a loan, using unused funds within the European budget.

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

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also significant," she remarked. "It also sends a powerful signal that when you cause all this damage to another nation, you have to pay for the rebuilding."