🔗 Share this article

The Russian central bank has announced it is seeking compensation totaling $230 billion against the securities depository Euroclear. This legal step represents a direct warning by the Kremlin against proposals to utilize immobilized Russian sovereign assets to aid Ukraine.

The Legal Claim

Based on accounts in Russian state media, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

EU leaders will decide later this week on a proposal to leverage approximately €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a substantial loan to fund its military and financial needs.

Most of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the main keeper for the Russian immobilised financial reserves.

A Clash Over Legality

EU officials have maintained that their plan is on solid legal ground. Their position rests on the principle that title of the sovereign wealth still belongs to Russia, despite being it was immobilized in European countries shortly after the full-scale invasion of Ukraine.

The Russian government, however, has called any use of the funds as illegal appropriation. It has warned of reciprocal actions, including seizing EU private investors' assets within Russia.

Kirill Dmitriev, who has assumed a key role in peace negotiations, stated on a social media platform that Russia "will win in court" and retrieve its funds. He added that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

With statements interpreted as an effort to create division between Europe and the United States, the official described the proposal as "a vicious attack on the right to ownership and the international reserves system established by the United States."

The clearing house refused to provide a statement on the new legal action. It has previously stated it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in European nations are not expected to enforce judgments from Russian tribunals, experts expect Moscow to seek enforcement in countries with closer relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that relevant holdings can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials indicated they are developing measures to deter other nations from aiding any Russian legal action against European entities. They are also designing safeguards to shield EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain untouched.

Kyiv would only be required to repay the loan in the event that Russia agreed to pay compensation for the immense damage caused during the ongoing conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This entails common EU debt issuance to fund a loan, using unallocated funds within the EU budget.

This alternative move, however, requires unanimity among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it delivers a clear signal that when you do all this damage to another country, you must pay for the rebuilding."