🔗 Share this article

The Russian central bank has announced it is pursuing compensation valued at $230 billion from the securities depository Euroclear. This move represents a clear response by the Kremlin regarding plans to utilize immobilized Russian sovereign funds to aid Ukraine.

The Financial Lawsuit

According to accounts in local news outlets, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders will decide later this week on a proposal to use approximately €210 billion in frozen Russian assets. The proposal involves granting Ukraine with a large loan to fund its defence and financial stability.

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

A Clash Over Legality

European Union authorities have maintained that their proposal is on solid legal ground. Their position rests on the principle that ownership of the sovereign wealth remains with Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any utilization of the funds as theft. Authorities have warned of retaliatory actions, including confiscating EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in peace negotiations, wrote on X that Russia "will prevail in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements interpreted as an effort to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on the right to ownership and the international reserves system established by the United States."

Euroclear refused to comment on the new legal action. The institution has previously noted it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although courts in European nations are unlikely to recognize judgments from Russian tribunals, analysts anticipate Moscow to seek enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant holdings can be located," commented a lawyer from an international firm.

EU Countermeasures

EU officials indicated they are developing steps to discourage other nations from assisting any Russian lawsuits against European companies. They are also designing protections to shield EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay untouched.

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

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This involves common 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, viewed as friendly with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is equally important," she stated. "It also sends a clear message that if you cause all this destruction to another nation, you must pay for the rebuilding."