🔗 Share this article

Russia's monetary authority has stated it is pursuing damages amounting to $230 billion against the securities depository Euroclear. This action represents a clear warning from the Kremlin regarding plans to utilize frozen Russian sovereign funds to support Ukraine.

The Substantial Demand

Based on reports in Russian news outlets, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

EU leaders will decide later this week on a plan to use approximately €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a large loan to finance its military and financial needs.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the primary custodian for the Russian frozen financial reserves.

A Clash Over Legality

EU authorities have maintained that their plan is on solid legal ground. They argue is based on the fact that ownership of the state assets remains with Russia, despite being it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

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

Kirill Dmitriev, who has assumed a prominent role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements seen as an attempt to create division between Europe and the United States, the official characterized the assets plan as "a severe attack on the right to ownership and the international reserves system created by the United States."

The clearing house declined to comment on the latest legal action. The institution has previously stated it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are not expected to enforce rulings from Russian tribunals, experts expect Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to deter other nations from aiding any Russian legal action against EU companies. Additionally, they are designing protections to protect EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain untouched.

Kyiv would only be required to repay the money in the event that Russia consented to pay compensation for the vast damage inflicted during the ongoing conflict.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This involves joint EU debt issuance to secure a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, requires unanimity among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the most credible solution" for aiding 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 delivers a powerful signal that when you cause all this destruction to another nation, you must pay for the rebuilding."