🔗 Share this article

The Russian central bank has announced it is claiming damages valued at $230 billion from the securities depository Euroclear. This move represents a clear warning by the Kremlin against plans to use frozen Russian sovereign assets to support Ukraine.

The Substantial Demand

According to accounts in local state media, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

EU leaders will determine later this week on a proposal to use approximately €210 billion in immobilized Russian assets. This scheme entails providing Ukraine with a large loan to finance its military and financial needs.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear depository in Brussels. This institution serves as the main keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

European Union authorities have argued that their plan is on solid legal ground. Their position rests on the principle that title of the sovereign wealth remains with Russia, even though it was immobilized in EU countries shortly after the full-scale military offensive of Ukraine.

The Russian government, in contrast, has called any use of the assets as theft. It has threatened reciprocal measures, including confiscating EU private investors' assets within Russia.

Kirill Dmitriev, who has assumed a prominent position 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 suffer" from the proposal.

Geopolitical Maneuvering

In comments interpreted as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a vicious attack on property rights and the international reserves system created by the United States."

The clearing house declined to provide a statement on the latest lawsuit. The institution has in the past noted it is contending with over 100 lawsuits in Russian courts.

Enforcement Challenges

While judges in European nations are unlikely to recognize rulings from Russian courts, experts anticipate Moscow to pursue enforcement in countries with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant holdings can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing steps to discourage other nations from assisting any Russian legal action against EU companies. Additionally, they are designing safeguards to protect EU countries with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay untouched.

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

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for funding Ukraine. This involves common EU borrowing to secure a loan, using unused funds within the European budget.

This alternative move, however, demands unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the strongest option" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "It also delivers a powerful message that if you do all this destruction to another nation, you must pay for the reparations."