🔗 Share this article

The Russian central bank has declared it is seeking damages amounting to $230 billion against the securities depository Euroclear. This action is a direct response from the Kremlin against plans to utilize frozen Russian sovereign assets to aid Ukraine.

The Substantial Demand

Based on accounts in Russian news outlets, the monetary authority filed a claim last week for approximately 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 plan to use around €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a large loan to finance its defence and financial stability.

The vast majority of these funds, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the main custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

European Union officials have maintained that their plan is legally sound. They argue is based on the principle that ownership of the sovereign wealth remains with Russia, even though it was frozen in European jurisdictions shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any utilization of the assets as theft. Authorities have warned of retaliatory measures, including seizing EU private investors' assets within Russia.

Kirill Dmitriev, who has taken on a prominent position in peace negotiations, stated on X that Russia "will win in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

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

Euroclear declined to comment on the new lawsuit. The institution has in the past stated it is facing more than 100 legal cases in Russian courts.

Enforcement Challenges

Although judges in EU countries are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to seek enforcement in countries with closer relations to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be located," commented a lawyer from an NSP law firm.

European Safeguards

European authorities indicated they are working on measures to deter other countries from aiding any Russian legal action against EU companies. Additionally, they are designing safeguards to protect EU member states with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would only be obligated to repay the money if and when Russia consented to pay reparations for the vast destruction inflicted during the nearly four-year war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This entails common EU debt issuance to fund a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, requires full agreement among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also significant," she stated. "Furthermore, it sends a powerful message that when you do all this destruction to another country, you must pay for the rebuilding."