🔗 Share this article

Russia's monetary authority has declared it is pursuing compensation amounting to $230 billion from the financial institution Euroclear. This action represents a direct response by the Kremlin against plans to utilize immobilized Russian sovereign funds to aid Ukraine.

The Substantial Demand

According to accounts in local news outlets, the central bank filed a lawsuit last week for an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

EU leaders are set to determine in the coming days regarding a plan to leverage around €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a large loan to fund its defence and economic needs.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the main keeper for the Russian frozen sovereign wealth.

Divergent Legal Views

European Union officials have argued that their proposal is legally sound. Their position rests on the fact that title of the sovereign wealth still belongs to Russia, even though it was frozen in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any utilization of the assets as theft. It has warned of reciprocal measures, including confiscating EU private investors' holdings within Russia.

Kirill Dmitriev, who has assumed a prominent position in peace negotiations, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements seen as an effort to drive a wedge between Europe and the United States, the official characterized the assets plan as "a severe assault on the right to ownership and the international reserves system established by the United States."

The clearing house declined to comment on the latest lawsuit. The institution has in the past stated it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are not expected to recognize rulings from Russian courts, experts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant holdings can be located," commented a legal expert from an international firm.

EU Countermeasures

European authorities said they are working on measures to deter other nations from aiding any Russian legal action against EU entities. Additionally, they are crafting protections to protect EU member states with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Ukraine would solely be required to repay the money if and when Russia consented to pay reparations for the vast destruction inflicted during the ongoing war.

Alternative Proposals

Belgium, backed 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, using unallocated funds within the EU budget.

This alternative move, nevertheless, requires unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it delivers a powerful message that if you do all this damage to another nation, you must pay for the reparations."