🔗 Share this article

The Russian central bank has announced it is pursuing damages valued at $230 billion from the securities depository Euroclear. This action is a direct warning by the Kremlin against plans to utilize frozen Russian sovereign assets to support Ukraine.

The Substantial Demand

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

EU leaders will determine later this week regarding a proposal to use around €210 billion in immobilized Russian assets. This scheme entails providing Ukraine with a substantial loan to finance its military and financial stability.

Most of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the main custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

European Union officials have argued that their proposal is on solid legal ground. They argue is based on the principle that title of the sovereign wealth remains with Russia, despite being it was frozen in European jurisdictions shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as illegal appropriation. It has warned of reciprocal actions, including seizing European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent position in peace negotiations, wrote on X that Russia "will win in court" and regain its assets. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

In comments seen as an effort to create division between Europe and the United States, the official characterized the assets plan as "a severe attack on the right to ownership and the global financial system created by the United States."

Euroclear declined to comment on the new lawsuit. The institution has previously noted it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in European nations are unlikely to recognize rulings from Russian tribunals, analysts anticipate Moscow to seek enforcement in countries 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 nations, provided that relevant assets can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to deter other countries from assisting any Russian lawsuits against EU companies. They are also designing safeguards to shield EU member states with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay unaffected.

Ukraine would only be obligated to repay the loan in the event that Russia consented to pay reparations for the vast damage caused during the ongoing conflict.

Other Funding Ideas

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

Such a proposal, nevertheless, requires unanimity among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our public funds, which is also important," she stated. "It also delivers a powerful signal that if you cause all this damage to another country, you have to pay for the reparations."