🔗 Share this article

Russia's monetary authority has announced it is pursuing damages totaling $230 billion against the financial institution Euroclear. This legal step represents a clear response from the Kremlin regarding proposals to utilize frozen Russian state assets to support Ukraine.

The Substantial Demand

According to reports in Russian state media, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

European Union officials are set to determine in the coming days regarding a proposal to leverage approximately €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a large loan to finance its defence and financial needs.

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

Dispute on Ownership

EU officials have argued that their proposal is legally sound. They argue is based on the principle that ownership of the state assets still belongs to Russia, even though it was frozen in European jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the assets as theft. Authorities have warned of retaliatory actions, including seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Wider Implications

In comments interpreted as an effort to create division between Europe and the United States, Dmitriev described the assets plan as "a severe assault on property rights and the global financial system established by the United States."

Euroclear declined to provide a statement on the new lawsuit. It has in the past stated it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

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

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to discourage other countries from assisting any Russian lawsuits against EU entities. Additionally, they are crafting protections to protect EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Kyiv would only be obligated to repay the money in the event that Russia agreed to pay compensation for the vast damage caused during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This entails joint EU borrowing to secure a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it is not drawn from our public funds, which is equally significant," she stated. "It also delivers a powerful signal that if you cause all this damage to another nation, you have to pay for the reparations."