🔗 Share this article

The Russian central bank has announced it is seeking damages amounting to $230 billion from the securities depository Euroclear. This action is a clear warning by the Kremlin regarding plans to utilize frozen Russian state assets to aid Ukraine.

The Legal Claim

Based on accounts in local news outlets, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

EU leaders are set to decide in the coming days on a proposal to use around €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a large loan to finance its defence and financial needs.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the primary keeper for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU officials have maintained that their plan is legally sound. They argue is based on the fact that title of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU countries shortly after the 2022 invasion of Ukraine.

The Russian government, however, has called any use of the funds as theft. Authorities have threatened reciprocal actions, such as seizing European corporate assets within Russia.

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

Geopolitical Maneuvering

With statements seen as an effort to create division between Europe and the United States, the official described the assets plan as "a vicious attack on property rights and the global financial system established by the United States."

The clearing house declined to comment on the latest legal action. It has in the past noted it is contending with over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

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

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant assets can be located," commented a lawyer from an international firm.

European Safeguards

EU officials indicated they are developing steps to deter other nations from assisting any Russian legal action against European 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 detailed plan, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain unaffected.

Ukraine would only be obligated to return the loan in the event that Russia consented to pay compensation for the vast destruction inflicted during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for financing Ukraine. This entails joint EU borrowing to secure a loan, backed by unallocated funds within the European budget.

This alternative move, however, demands unanimity among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also important," she remarked. "It also sends a powerful message that when you do all this damage to another nation, you must pay for the rebuilding."