🔗 Share this article

The Russian central bank has declared it is pursuing damages valued at $230 billion from the securities depository Euroclear. This action is a direct warning from the Kremlin against proposals to utilize frozen Russian state funds to support Ukraine.

The Substantial Demand

According to accounts in local state media, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

EU leaders are set to determine in the coming days regarding a proposal to use approximately €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a large loan to finance its military and economic stability.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian frozen financial reserves.

A Clash Over Legality

European Union officials have maintained that their plan is legally sound. Their position rests on the fact that ownership of the state assets remains with Russia, even though it was frozen in European jurisdictions following the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as theft. Authorities have warned of retaliatory measures, such as confiscating European private investors' holdings within Russia.

Kirill Dmitriev, a figure who has taken on a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious assault on the right to ownership and the international reserves system established by the United States."

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

Legal Hurdles Ahead

Although judges in EU countries are not expected to enforce judgments from Russian courts, analysts anticipate Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia 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 such holdings can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are developing steps to discourage other nations from assisting any Russian legal action against European companies. Additionally, they are designing safeguards to protect EU member states with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would provide an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain untouched.

Kyiv would solely be required to return the money in the event that Russia agreed to pay compensation for the immense destruction inflicted during the nearly four-year war.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for financing Ukraine. This involves joint EU borrowing to fund a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our public funds, which is also important," she stated. "Furthermore, it sends a clear signal that when you cause all this damage to another country, you have to pay for the rebuilding."