🔗 Share this article

Russia's monetary authority has stated it is seeking compensation amounting to $230 billion from the securities depository Euroclear. This legal step represents a direct response by the Kremlin against proposals to use immobilized Russian state assets to support Ukraine.

The Financial Lawsuit

Based on reports in Russian news outlets, the central bank filed a lawsuit last week for an estimated 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

EU leaders are set to determine later this week on a plan to leverage around €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to fund its defence and financial needs.

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

A Clash Over Legality

European Union authorities have argued that their plan is on solid legal ground. Their position is based on the fact that title of the sovereign wealth remains with Russia, even though it was immobilized in European countries following the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the funds as illegal appropriation. It has threatened reciprocal actions, such as seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, stated on a social media platform that Russia "will win in court" and regain its assets. He warned that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a vicious attack on property rights and the international reserves system created by the United States."

The clearing house refused to provide a statement on the new lawsuit. It has previously stated it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are not expected to enforce rulings from Russian courts, experts expect Moscow to pursue enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such assets can be identified," stated a lawyer from an international firm.

European Safeguards

EU officials said they are working on measures to deter other nations from assisting any Russian lawsuits against European entities. They are also designing safeguards to protect EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain unaffected.

Ukraine would solely be required to repay the loan if and when Russia consented to pay compensation for the vast destruction inflicted during the ongoing conflict.

Other Funding Ideas

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

Such a proposal, nevertheless, requires full agreement among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally important," she remarked. "It also delivers a clear message that if you cause all this destruction to another nation, you have to pay for the rebuilding."