🔗 Share this article

The Russian central bank has declared it is seeking compensation totaling $230 billion against the securities depository Euroclear. This action represents a direct response from the Kremlin against proposals to utilize immobilized Russian state assets to support Ukraine.

The Substantial Demand

According to accounts in local state media, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

European Union officials are set to decide in the coming days regarding a proposal to use approximately €210 billion in frozen Russian state funds. This scheme entails granting Ukraine with a substantial loan to fund its defence and economic stability.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

European Union authorities have maintained that their proposal is legally sound. They argue is based on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

Moscow, however, has called any use of the assets as illegal appropriation. It has threatened retaliatory actions, such as seizing European corporate assets within Russia.

Kirill Dmitriev, who has assumed a prominent position in diplomatic talks, stated on a social media platform that Russia "will win in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements interpreted as an effort to create division between Europe and the United States, the official characterized the proposal as "a severe assault on property rights and the international reserves system established by the United States."

Euroclear declined to provide a statement on the new legal action. It has previously stated it is contending with over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are unlikely to enforce judgments from Russian tribunals, analysts expect Moscow to pursue enforcement in nations with stronger ties to the Kremlin.

"Russian monetary authorities 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, if relevant holdings can be identified," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to deter other countries from assisting any Russian lawsuits against European companies. Additionally, they are crafting safeguards to shield EU member states with investments in Russia from what they term "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 proceeds earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain untouched.

Kyiv would solely be required to return the loan in the event that Russia consented to pay compensation for the immense damage inflicted during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for funding Ukraine. This involves joint EU borrowing to fund a loan, using unallocated funds within the European budget.

This alternative move, nevertheless, requires unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU top diplomat, a senior official, described the reparations loan as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is also important," she remarked. "Furthermore, it delivers a clear signal that if you cause all this damage to another country, you have to pay for the reparations."