🔗 Share this article

Russia's monetary authority has stated it is pursuing damages valued at $230 billion against the securities depository Euroclear. This move is a direct warning by the Kremlin regarding proposals to use frozen Russian sovereign assets to support Ukraine.

The Legal Claim

According to reports in local news outlets, the central bank initiated a lawsuit last week for roughly 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

European Union officials will determine in the coming days regarding a plan to use around €210 billion in immobilized Russian assets. This scheme entails providing Ukraine with a large loan to fund its defence and financial needs.

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

Divergent Legal Views

European Union officials have argued that their proposal is on solid legal ground. Their position rests on the principle that ownership of the state assets remains with Russia, even though it was frozen in EU countries following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the assets as illegal appropriation. It has threatened retaliatory measures, such as confiscating EU corporate holdings within Russia.

Kirill Dmitriev, a figure who has assumed a key role in peace negotiations, stated on a social media platform that Russia "will win in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Wider Implications

With statements seen as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious assault on the right to ownership and the international reserves system created by the United States."

The clearing house declined to comment on the latest lawsuit. The institution has previously noted it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

While courts in EU countries are unlikely to enforce judgments from Russian courts, analysts anticipate Moscow to pursue enforcement in countries with closer relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

EU officials said they are developing steps to deter other nations from assisting any Russian legal action against EU entities. Additionally, they are crafting safeguards to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the complex scheme, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Kyiv would only be required to repay the loan if and when Russia consented to pay reparations for the immense destruction inflicted during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This entails joint EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, demands unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our public funds, which is also important," she remarked. "It also delivers a clear signal that if you do all this damage to another country, you must pay for the reparations."