🔗 Share this article

The Russian central bank has announced it is seeking damages totaling $230 billion from the securities depository Euroclear. This action is a direct warning from the Kremlin regarding plans to use immobilized Russian sovereign funds to aid Ukraine.

The Legal Claim

According to accounts in local state media, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

European Union officials are set to decide later this week regarding a plan to leverage around €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a large loan to finance its defence and economic stability.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Russian immobilised financial reserves.

Dispute on Ownership

EU officials have maintained that their plan is on solid legal ground. They argue is based on the principle that title of the state assets still belongs to Russia, despite being it was frozen in EU countries shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the funds as illegal appropriation. It has warned of retaliatory measures, such as seizing EU corporate assets within Russia.

Kirill Dmitriev, a figure who has assumed a key position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a severe attack on property rights and the international reserves system established by the United States."

Euroclear declined to comment on the latest legal action. The institution has in the past stated it is contending with over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

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

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant holdings can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are working on measures to deter other countries from assisting any Russian lawsuits against EU entities. They are also crafting safeguards to protect EU member states with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay untouched.

Kyiv would only be obligated to repay the money if and when Russia agreed to pay reparations for the vast destruction caused during the nearly four-year war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for financing Ukraine. This entails joint EU debt issuance to fund a loan, backed by unallocated funds within the European budget.

This alternative move, however, demands full agreement among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally significant," she stated. "It also delivers a clear signal that if you do all this destruction to another nation, you must pay for the rebuilding."