🔗 Share this article

The Russian central bank has stated it is pursuing damages amounting to $230 billion against the securities depository Euroclear. This legal step constitutes a clear warning from the Kremlin regarding plans to use frozen Russian state assets to support Ukraine.

The Financial Lawsuit

Based on reports in Russian state media, the monetary authority filed a claim last week for approximately 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

European Union officials are set to decide in the coming days on a proposal to leverage approximately €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a substantial loan to finance its military and economic stability.

The vast majority of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Russian immobilised sovereign wealth.

A Clash Over Legality

EU authorities have argued that their plan is on solid legal ground. They argue rests on the principle that ownership of the state assets still belongs to Russia, even though it was immobilized in EU countries following the 2022 military offensive of Ukraine.

Moscow, however, has called any utilization of the assets as illegal appropriation. Authorities have threatened retaliatory measures, such as confiscating EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its assets. He added that the EU, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

In comments interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious assault on property rights and the international reserves system created by the United States."

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

Legal Hurdles Ahead

Although judges in European nations are not expected to enforce judgments from Russian tribunals, experts anticipate Moscow to pursue enforcement in countries with closer relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such assets can be located," commented a lawyer from an international firm.

European Safeguards

EU officials said they are developing measures to deter other nations from aiding any Russian legal action against EU entities. They are also designing safeguards to shield EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay unaffected.

Ukraine would only be obligated to return the loan in the event that Russia consented to pay compensation for the vast destruction caused during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for financing Ukraine. This involves common EU borrowing to fund a loan, backed by unallocated funds within the EU budget.

This alternative move, nevertheless, requires full agreement among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, a senior official, described the reparations loan as "the strongest option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also significant," she remarked. "Furthermore, it sends a clear message that when you cause all this destruction to another country, you must pay for the reparations."