🔗 Share this article

Russia's monetary authority has declared it is seeking damages totaling $230 billion against the securities depository Euroclear. This move is a direct warning by the Kremlin regarding plans to utilize immobilized Russian sovereign funds to aid Ukraine.

The Legal Claim

According to accounts in local news outlets, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This figure corresponds to the aforementioned $230 billion demand.

European Union officials are set to decide later this week regarding a proposal to use approximately €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a large loan to finance its military and economic stability.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Russian immobilised sovereign wealth.

Dispute on Ownership

EU authorities have argued that their proposal is legally sound. Their position is based on the fact that title of the state assets still belongs to Russia, even though it was frozen in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any use of the funds as theft. Authorities have threatened retaliatory measures, such as seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent role in diplomatic talks, stated on X that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

In comments seen as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a severe assault on property rights and the global financial system established by the United States."

Euroclear declined to provide a statement on the new legal action. It has in the past noted it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are not expected to recognize rulings from Russian courts, analysts expect Moscow to seek enforcement in countries 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 sympathetic nations, if relevant assets can be identified," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to deter other nations from aiding any Russian lawsuits against European entities. Additionally, they are crafting safeguards to shield EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the complex scheme, the EU would provide an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain untouched.

Ukraine would only be obligated to repay the loan if and when Russia agreed to pay compensation for the immense damage caused during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for financing Ukraine. This involves joint EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, nevertheless, requires unanimity among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also significant," she remarked. "Furthermore, it sends a clear message that when you do all this destruction to another country, you must pay for the rebuilding."