🔗 Share this article

Russia's monetary authority has declared it is pursuing compensation totaling $230 billion from the securities depository Euroclear. This move is a direct response by the Kremlin against proposals to use frozen Russian state assets to aid Ukraine.

The Substantial Demand

Based on accounts in Russian state media, the central bank filed a claim last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials are set to determine in the coming days on a proposal to use around €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a large loan to fund its military and financial needs.

Most of these funds, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU officials have maintained that their plan is legally sound. They argue rests on the principle that ownership of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU countries following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as theft. Authorities have warned of retaliatory measures, such as seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, 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 funds. He added that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious attack on property rights and the international reserves system established by the United States."

The clearing house declined to comment on the latest lawsuit. The institution has in the past noted it is facing more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in European nations are unlikely to recognize rulings from Russian courts, experts anticipate Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such assets can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are working on measures to discourage other countries from assisting any Russian lawsuits against EU companies. Additionally, they are designing protections to protect EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would solely be obligated to return the loan if and when Russia agreed to pay reparations for the immense destruction caused during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for financing Ukraine. This entails joint EU debt issuance to secure a loan, using unallocated funds within the EU budget.

Such a proposal, however, demands full agreement among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also important," she stated. "Furthermore, it sends a powerful message that if you cause all this damage to another country, you must pay for the reparations."