🔗 Share this article

Russia's monetary authority has declared it is claiming compensation totaling $230 billion from the securities depository Euroclear. This legal step is a clear response from the Kremlin regarding plans to utilize frozen Russian state assets to support Ukraine.

The Financial Lawsuit

According to accounts in Russian news outlets, the central bank initiated a lawsuit last week for roughly 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

European Union officials are set to decide in the coming days on a proposal to use approximately €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a substantial loan to finance its defence and economic stability.

The vast majority of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU authorities have maintained 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 frozen in European jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as theft. It has warned of reciprocal actions, including seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

In comments seen as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious assault on the right to ownership and the international reserves system created by the United States."

Euroclear declined to provide a statement on the latest legal action. It has in the past stated it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although judges in European nations are not expected to recognize judgments from Russian tribunals, experts expect Moscow to seek enforcement in nations with stronger relations to the Kremlin.

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

European Safeguards

European authorities said they are developing measures to discourage other countries from assisting any Russian legal action against EU entities. They are also designing safeguards to shield EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an initial €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 remain unaffected.

Kyiv would solely be required to return the loan if and when Russia consented to pay compensation for the immense destruction inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for financing Ukraine. This involves common EU debt issuance to secure a loan, backed by unallocated funds within the European budget.

This alternative move, however, demands full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it is not drawn from our public funds, which is equally important," she stated. "Furthermore, it delivers a clear signal that if you cause all this destruction to another country, you have to pay for the reparations."