🔗 Share this article

Russia's monetary authority has declared it is claiming damages valued at $230 billion against the securities depository Euroclear. This move constitutes a clear warning by the Kremlin against plans to utilize immobilized Russian state assets to support Ukraine.

The Legal Claim

According to reports in local news outlets, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

European Union officials are set to decide later this week regarding a proposal to use around €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to finance its military and financial needs.

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Russian frozen sovereign wealth.

Divergent Legal Views

European Union officials have argued that their plan is on solid legal ground. Their position rests on the fact that ownership of the sovereign wealth remains with Russia, despite being it was immobilized in European jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, however, has called any utilization of the funds as theft. Authorities have threatened retaliatory actions, including seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent position in diplomatic talks, stated on a social media platform that Russia "will win in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a severe attack on property rights and the global financial system established by the United States."

Euroclear declined to provide a statement on the new lawsuit. The institution has previously noted it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in European nations are unlikely to enforce judgments from Russian tribunals, experts anticipate Moscow to seek enforcement in countries with stronger relations to the Kremlin.

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

European Safeguards

European authorities indicated they are working on steps to discourage other nations from aiding any Russian lawsuits against European 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

Under the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay untouched.

Kyiv would solely be obligated to return the loan if and when Russia agreed to pay reparations for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for financing Ukraine. This entails common EU debt issuance to fund a loan, using unallocated funds within the European budget.

This alternative move, however, requires unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also important," she remarked. "Furthermore, it sends a powerful message that when you cause all this destruction to another country, you must pay for the reparations."