🔗 Share this article

Russia's monetary authority has declared it is pursuing compensation amounting to $230 billion against the securities depository Euroclear. This action represents a clear warning from the Kremlin against proposals to use frozen Russian sovereign assets to support Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

EU leaders are set to decide in the coming days on a plan to leverage around €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a large loan to finance its military and financial stability.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Kremlin's frozen financial reserves.

Divergent Legal Views

European Union officials have maintained that their proposal is legally sound. They argue rests on the principle that title of the sovereign wealth remains with Russia, despite being it was frozen in European countries following the 2022 invasion of Ukraine.

Moscow, however, has labeled any utilization of the assets as illegal appropriation. Authorities have threatened reciprocal actions, including confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in peace negotiations, stated on X that Russia "will prevail in court" and regain its assets. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements seen as an attempt to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious attack on the right to ownership and the international reserves system established by the United States."

Euroclear refused to provide a statement on the latest legal action. The institution has in the past stated it is facing more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in EU countries are not expected to recognize judgments from Russian tribunals, analysts anticipate Moscow to seek implementation in countries with closer relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such holdings can be identified," commented a lawyer from an NSP law firm.

European Safeguards

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

The Proposed Loan Mechanism

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain unaffected.

Ukraine would only be obligated to return the money if and when Russia consented to pay reparations for the immense damage caused during the ongoing war.

Alternative Proposals

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

This alternative move, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also important," she stated. "Furthermore, it delivers a clear message that if you do all this damage to another country, you have to pay for the reparations."