🔗 Share this article

Russia's monetary authority has announced it is claiming compensation totaling $230 billion against the securities depository Euroclear. This move constitutes a direct warning by the Kremlin regarding proposals to use frozen Russian state assets to aid Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

EU leaders will decide in the coming days regarding a plan to leverage approximately €210 billion in immobilized Russian state funds. This scheme involves providing Ukraine with a large loan to fund its military and financial needs.

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the primary keeper for the Russian frozen sovereign wealth.

Divergent Legal Views

European Union officials have maintained that their plan is legally sound. Their position is based on the principle that ownership of the state assets still belongs to Russia, even though it was immobilized in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any use of the funds as theft. Authorities have warned of retaliatory actions, including seizing European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent role in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, the official described the assets plan as "a vicious assault on the right to ownership and the global financial system established by the United States."

The clearing house refused to comment on the new legal action. The institution has previously stated it is facing over 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in EU countries are unlikely to enforce judgments from Russian tribunals, experts anticipate Moscow to seek enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be identified," stated a lawyer from an international firm.

European Safeguards

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

How the Funding Would Work

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

Ukraine would solely be obligated to repay the money if and when Russia consented to pay compensation for the vast damage caused during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for financing Ukraine. This entails joint EU debt issuance to secure a loan, using unallocated funds within the EU budget.

Such a proposal, however, demands full agreement among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is equally important," she stated. "Furthermore, it sends a clear message that if you do all this damage to another nation, you must pay for the reparations."