🔗 Share this article

Russia's monetary authority has stated it is claiming damages totaling $230 billion against the financial institution Euroclear. This action is a direct response by the Kremlin regarding plans to use frozen Russian state funds to support Ukraine.

The Substantial Demand

Based on accounts in local state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

European Union officials are set to determine later this week regarding a plan to leverage approximately €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a substantial loan to fund its military and financial needs.

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

A Clash Over Legality

EU officials have maintained that their proposal is legally sound. They argue rests on the principle that ownership of the sovereign wealth remains with Russia, despite being it was frozen in European countries shortly after the full-scale invasion of Ukraine.

Moscow, however, has called any utilization of the assets as theft. It has warned of reciprocal measures, such as confiscating European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in diplomatic talks, stated on a social media platform that Russia "will win in court" and regain its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a severe attack on the right to ownership and the global financial system created by the United States."

The clearing house declined to comment on the latest lawsuit. It has previously stated it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although courts in EU countries are unlikely to enforce judgments from Russian courts, experts anticipate Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant holdings can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to deter other nations from assisting any Russian legal action against EU companies. They are also designing protections to shield EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay untouched.

Kyiv would solely be required to repay the loan in the event that Russia consented to pay reparations for the vast damage inflicted during the ongoing conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for funding Ukraine. This involves joint EU borrowing to fund a loan, using unused funds within the European budget.

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

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it delivers a powerful signal that if you do all this damage to another country, you have to pay for the reparations."