🔗 Share this article

The Russian central bank has announced it is seeking damages totaling $230 billion from the securities depository Euroclear. This move constitutes a direct warning by the Kremlin regarding proposals to utilize frozen Russian sovereign assets to aid Ukraine.

The Legal Claim

According to accounts in Russian state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

EU leaders are set to decide later this week on a plan to use around €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a substantial loan to finance its military and economic stability.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the main keeper for the Russian frozen financial reserves.

Dispute on Ownership

European Union officials have maintained that their plan is on solid legal ground. They argue rests on the principle that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

The Russian government, however, has called any utilization of the assets as theft. It has threatened reciprocal measures, such as confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in diplomatic talks, wrote on X that Russia "will win in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

In comments seen as an attempt to drive a wedge between Europe and the United States, the official characterized the assets plan as "a vicious attack on property rights and the international reserves system established by the United States."

Euroclear refused to provide a statement on the new lawsuit. It has in the past stated it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in European nations are not expected to enforce rulings from Russian courts, experts expect Moscow to seek enforcement in nations with closer relations to the Kremlin.

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

EU Countermeasures

European authorities said they are developing measures to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are designing safeguards to protect EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay unaffected.

Ukraine would only be obligated to repay the money if and when Russia agreed to pay compensation for the vast damage caused during the ongoing conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for funding Ukraine. This entails common EU borrowing to fund a loan, backed by unused funds within the European budget.

This alternative move, nevertheless, requires full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally important," she remarked. "It also delivers a clear message that when you cause all this destruction to another country, you have to pay for the reparations."