🔗 Share this article

Russia's monetary authority has stated it is pursuing compensation totaling $230 billion from the securities depository Euroclear. This action constitutes a direct response by the Kremlin against plans to use immobilized Russian state funds to aid Ukraine.

The Substantial Demand

Based on reports in local state media, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders will decide later this week on a plan to leverage approximately €210 billion in frozen Russian state funds. This scheme entails granting Ukraine with a substantial loan to fund its military and financial stability.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the main keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their proposal is legally sound. Their position is based on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU countries following the 2022 invasion of Ukraine.

Moscow, however, has called any utilization of the assets as illegal appropriation. Authorities have warned of retaliatory measures, including confiscating European corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position in peace negotiations, wrote on X that Russia "will win in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

In comments seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on property rights and the global financial system established by the United States."

The clearing house declined to comment on the latest lawsuit. It has in the past noted it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although courts in European nations are unlikely to recognize rulings from Russian courts, experts expect Moscow to seek implementation in countries with stronger relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such holdings can be located," stated a lawyer from an international firm.

European Safeguards

EU officials said they are developing measures to deter other nations from assisting any Russian lawsuits against European companies. Additionally, they are designing safeguards to shield EU countries with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain untouched.

Ukraine would solely be obligated to repay the loan in the event that Russia agreed to pay compensation for the vast destruction caused during the nearly four-year war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for financing Ukraine. This entails joint EU debt issuance to secure a loan, using unallocated funds within the European budget.

Such a proposal, however, requires unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is equally significant," she remarked. "It also sends a clear message that when you cause all this damage to another nation, you have to pay for the reparations."