🔗 Share this article

The Russian central bank has declared it is seeking compensation valued at $230 billion against the securities depository Euroclear. This move is a direct response from the Kremlin regarding plans to use immobilized Russian sovereign funds to aid Ukraine.

The Legal Claim

Based on reports in local news outlets, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

European Union officials are set to determine in the coming days on a proposal to leverage approximately €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to fund its military and financial stability.

The vast majority of these funds, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the main custodian for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their plan is on solid legal ground. Their position is based on the fact that title of the sovereign wealth still belongs to Russia, even though it was frozen in European jurisdictions following the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the assets as illegal appropriation. Authorities have warned of retaliatory measures, such as seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in peace negotiations, stated on X that Russia "will win in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

With statements seen as an attempt to create division 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 established by the United States."

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

Enforcement Challenges

While courts in EU countries are unlikely to recognize rulings from Russian courts, experts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"Russian monetary authorities may attempt to implement 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 lawyer from an international firm.

EU Countermeasures

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

The Proposed Loan Mechanism

Under 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. Critically, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would only be required to repay the money in the event that Russia consented to pay reparations for the vast destruction inflicted during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This involves joint EU borrowing to fund a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, requires unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the most credible 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 also important," she stated. "It also sends a clear message that if you do all this destruction to another nation, you have to pay for the rebuilding."