🔗 Share this article

Russia's monetary authority has announced it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This move represents a clear response from the Kremlin regarding plans to use immobilized Russian state assets to aid Ukraine.

The Legal Claim

Based on reports in Russian state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

EU leaders will decide later this week regarding a plan to use approximately €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a large loan to fund its defence and economic stability.

Most of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Russian frozen sovereign wealth.

Dispute on Ownership

European Union authorities have maintained that their proposal is on solid legal ground. Their position is based on the principle that ownership of the state assets remains with Russia, even though it was frozen in European jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any utilization of the assets as illegal appropriation. It has threatened retaliatory measures, such as seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key position in peace negotiations, stated on X that Russia "will prevail in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements seen as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a severe attack on property rights and the international reserves system created by the United States."

The clearing house declined to provide a statement on the latest legal action. It has previously stated it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in European nations are unlikely to recognize judgments from Russian tribunals, analysts anticipate Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be located," commented a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are working on measures to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are crafting protections to protect EU countries with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Ukraine would solely be required to repay the loan if and when Russia agreed to pay compensation for the immense destruction inflicted during the ongoing war.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for funding Ukraine. This entails joint EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

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

Speaking on Monday, the EU top diplomat, a senior official, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is equally important," she remarked. "It also delivers a powerful message that when you cause all this damage to another country, you have to pay for the reparations."