🔗 Share this article

The Russian central bank has stated it is claiming damages totaling $230 billion against the securities depository Euroclear. This action represents a clear response by the Kremlin regarding plans to use immobilized Russian state funds to support Ukraine.

The Financial Lawsuit

According to accounts in local news outlets, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders will determine later this week on a proposal to leverage approximately €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a substantial loan to fund its defence and economic needs.

Most of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the main custodian for the Russian immobilised sovereign wealth.

A Clash Over Legality

EU officials have maintained that their proposal is on solid legal ground. They argue is based on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU countries following the 2022 invasion of Ukraine.

Moscow, however, has called any utilization of the assets as theft. It has threatened retaliatory measures, such as confiscating European corporate holdings within Russia.

Kirill Dmitriev, a figure who has taken on a key role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments seen as an attempt to drive a wedge between Europe and the United States, the official described the assets plan as "a severe attack on the right to ownership and the international reserves system created by the United States."

Euroclear refused to comment on the latest lawsuit. It has in the past stated it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are not expected to recognize judgments from Russian courts, experts expect Moscow to pursue enforcement in countries with closer ties 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 friendly states, if relevant holdings can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to deter other nations from aiding any Russian legal action against European companies. Additionally, they are crafting safeguards to protect EU member states with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain untouched.

Ukraine would only be required to repay the money in the event that Russia agreed to pay compensation for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for funding Ukraine. This involves joint EU debt issuance to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, demands unanimity among all 27 member states. Hungary's government, considered aligned with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the most credible solution" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our public funds, which is equally important," she remarked. "Furthermore, it sends a powerful signal that when you do all this destruction to another nation, you must pay for the rebuilding."