🔗 Share this article

Russia's monetary authority has announced it is seeking damages amounting to $230 billion against the securities depository Euroclear. This legal step constitutes a direct response by the Kremlin against proposals to utilize immobilized Russian state funds to support Ukraine.

The Legal Claim

Based on reports in local state media, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This figure corresponds to the aforementioned $230 billion demand.

European Union officials are set to determine in the coming days on a proposal to use around €210 billion in frozen Russian assets. The proposal involves granting Ukraine with a large loan to fund its military and financial needs.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Russian frozen sovereign wealth.

Dispute on Ownership

EU authorities have argued that their plan is on solid legal ground. Their position rests on the fact that title of the state assets remains with Russia, even though it was immobilized in EU countries following the 2022 invasion of Ukraine.

The Russian government, however, has labeled any use of the assets as illegal appropriation. Authorities have threatened retaliatory actions, including confiscating European corporate assets within Russia.

Kirill Dmitriev, who has assumed a key position in peace negotiations, stated on X that Russia "will win in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

With statements seen as an effort to drive a wedge between Europe and the United States, the official 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 latest lawsuit. It has in the past stated it is facing over 100 lawsuits in Russian courts.

Enforcement Challenges

While judges in European nations are unlikely to recognize rulings from Russian tribunals, analysts expect Moscow to seek enforcement in nations with closer relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be identified," commented a lawyer from an NSP law firm.

European Safeguards

European authorities said they are developing steps to discourage other nations from aiding any Russian legal action against EU entities. Additionally, they are designing protections to shield EU countries with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain unaffected.

Kyiv would only be required to return the money if and when Russia consented to pay compensation for the vast damage caused during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This involves joint EU debt issuance to fund a loan, using unallocated funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also important," she remarked. "It also sends a powerful message that if you cause all this destruction to another nation, you have to pay for the rebuilding."