🔗 Share this article

The Russian central bank has declared it is claiming compensation amounting to $230 billion from the securities depository Euroclear. This legal step represents a direct warning from the Kremlin against plans to utilize immobilized Russian sovereign funds to support Ukraine.

The Financial Lawsuit

Based on reports in Russian state media, the monetary authority filed a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

EU leaders will decide later this week on a plan to leverage approximately €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a large loan to finance its defence and economic stability.

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

Dispute on Ownership

European Union officials have maintained that their plan is legally sound. They argue is based on the principle that title of the state assets still belongs to Russia, even though it was frozen in European countries shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the funds as illegal appropriation. It has threatened reciprocal measures, including seizing European corporate assets within Russia.

Kirill Dmitriev, who has assumed a key role in diplomatic talks, wrote on X that Russia "will prevail in court" and retrieve its funds. He added that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Wider Implications

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a severe attack on the right to ownership and the international reserves system created by the United States."

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

Enforcement Challenges

Although judges in European nations are unlikely to recognize rulings from Russian courts, experts expect Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such assets can be located," commented a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are developing measures to discourage other countries from assisting any Russian legal action against European companies. They are also crafting safeguards to protect EU countries with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Ukraine would only be required to repay the loan in the event that Russia agreed to pay reparations for the vast destruction caused during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for financing Ukraine. This involves common EU borrowing to secure a loan, backed by unallocated funds within the European budget.

This alternative move, nevertheless, demands full agreement among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is also significant," she stated. "It also sends a powerful message that if you cause all this damage to another nation, you must pay for the rebuilding."