🔗 Share this article

The Russian central bank has stated it is seeking damages amounting to $230 billion against the securities depository Euroclear. This action constitutes a clear warning by the Kremlin regarding plans to utilize immobilized Russian sovereign assets to support Ukraine.

The Legal Claim

According to accounts in local news outlets, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

European Union officials will determine in the coming days regarding a plan to leverage approximately €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a large loan to fund its military and financial needs.

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

A Clash Over Legality

EU officials have maintained that their proposal is on solid legal ground. Their position is based on the principle that title of the sovereign wealth remains with Russia, even though it was frozen in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has called any use of the funds as illegal appropriation. Authorities have warned of reciprocal measures, such as confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position in diplomatic talks, wrote on X that Russia "will win in court" and regain its assets. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

In comments seen 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 global financial system established by the United States."

The clearing house refused to comment on the latest legal action. It has previously stated it is facing more than 100 legal cases in Russian courts.

Enforcement Challenges

Although judges in EU countries are unlikely to enforce rulings from Russian tribunals, analysts expect Moscow to pursue implementation in nations with stronger relations 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 nations, if relevant assets can be located," commented a legal expert from an NSP law firm.

European Safeguards

European authorities indicated they are developing measures to discourage other countries from assisting any Russian legal action against European entities. They are also designing safeguards to shield EU countries with assets in Russia from what they call "unlawful 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. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Ukraine would only be required to return the money if and when Russia agreed to pay reparations for the immense damage caused during the ongoing conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for financing Ukraine. This involves joint EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

This alternative move, however, demands unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU top diplomat, a senior official, described the reparations loan as "the most credible option" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is also important," she stated. "It also sends a clear signal that when you do all this damage to another country, you have to pay for the rebuilding."