🔗 Share this article

The Russian central bank has stated it is pursuing damages totaling $230 billion against the securities depository Euroclear. This move represents a clear warning from the Kremlin regarding plans to use frozen Russian state assets to aid Ukraine.

The Legal Claim

Based on accounts in local news outlets, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

EU leaders are set to determine later this week regarding a proposal to use around €210 billion in frozen Russian state funds. This scheme entails granting Ukraine with a large loan to fund its defence and financial needs.

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

Divergent Legal Views

EU authorities have maintained that their proposal is on solid legal ground. Their position rests on the principle that title of the state assets remains with Russia, despite being it was immobilized in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has called any use of the assets as illegal appropriation. It has warned of reciprocal measures, such as seizing European private investors' holdings within Russia.

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

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, the official described the proposal as "a vicious assault on property rights and the international reserves system established by the United States."

The clearing house refused to provide a statement on the latest lawsuit. It has previously noted it is contending with more than 100 lawsuits in Russian courts.

Enforcement Challenges

Although courts in European nations are unlikely to recognize judgments from Russian tribunals, experts anticipate Moscow to seek implementation in countries with closer relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant holdings can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials indicated they are working on steps to deter other nations from assisting any Russian legal action against EU entities. They are also designing protections to shield EU countries with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain unaffected.

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

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This involves joint EU borrowing to fund a loan, using unused funds within the EU budget.

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

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also significant," she remarked. "Furthermore, it delivers a clear signal that if you cause all this destruction to another nation, you must pay for the reparations."