🔗 Share this article

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

The Legal Claim

Based on reports in local news outlets, the monetary authority initiated a claim last week for approximately 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

European Union officials are set to decide in the coming days regarding a proposal to leverage approximately €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a substantial loan to fund its military and economic stability.

Most of these funds, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Russian immobilised financial reserves.

Divergent Legal Views

European Union officials have maintained that their plan is legally sound. They argue rests on the principle that ownership of the sovereign wealth remains with Russia, even though it was frozen in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as illegal appropriation. It has threatened retaliatory measures, such as confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Wider Implications

With statements seen as an attempt to drive a wedge between Europe and the United States, the official described the assets plan as "a vicious assault on property rights and the global financial system created by the United States."

The clearing house declined to comment on the new lawsuit. It has previously noted it is facing over 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in EU countries are not expected to recognize rulings from Russian tribunals, analysts expect Moscow to seek implementation in nations with stronger relations to the Kremlin.

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

EU Countermeasures

EU officials indicated they are developing measures to deter other nations from aiding any Russian lawsuits against EU companies. Additionally, they are crafting safeguards to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain unaffected.

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

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for funding Ukraine. This involves joint EU borrowing to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, however, requires unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally important," she stated. "Furthermore, it sends a powerful message that if you do all this destruction to another nation, you have to pay for the rebuilding."