🔗 Share this article

Russia's monetary authority has declared it is claiming compensation amounting to $230 billion from the securities depository Euroclear. This move represents a direct response by the Kremlin against proposals to utilize frozen Russian sovereign assets to aid Ukraine.

The Substantial Demand

Based on accounts in local news outlets, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

European Union officials are set to determine in the coming days on a plan to use approximately €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a substantial loan to fund its defence and economic needs.

Most of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Russian frozen sovereign wealth.

A Clash Over Legality

EU officials have maintained that their plan is legally sound. Their position is based on the principle that title of the sovereign wealth remains with Russia, even though it was immobilized in European jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any utilization of the assets as theft. It has threatened reciprocal actions, including confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments seen as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a vicious assault on property rights and the global financial system established by the United States."

The clearing house refused to comment on the latest legal action. The institution has previously noted it is facing more than 100 legal cases in Russian courts.

Enforcement Challenges

While judges in European nations are unlikely to recognize rulings from Russian tribunals, experts expect Moscow to seek implementation in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be located," stated a legal expert from an international firm.

EU Countermeasures

European authorities said they are working on measures to deter other nations from assisting any Russian lawsuits against European entities. They are also designing protections 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 provide an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain unaffected.

Kyiv would only be obligated to return the money in the event that Russia consented to pay compensation for the immense damage caused during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for financing Ukraine. This involves joint EU borrowing to secure a loan, backed by unused funds within the EU budget.

Such a proposal, however, demands unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the most credible option" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it is not drawn from our public funds, which is equally significant," she stated. "Furthermore, it sends a clear message that if you cause all this damage to another nation, you must pay for the reparations."