🔗 Share this article

The Russian central bank has declared it is pursuing damages totaling $230 billion against the securities depository Euroclear. This legal step represents a clear response from the Kremlin regarding plans to use frozen Russian sovereign funds to support Ukraine.

The Legal Claim

Based on reports in Russian news outlets, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

EU leaders will determine later this week on a plan to use approximately €210 billion in immobilized Russian state funds. This scheme involves providing Ukraine with a large loan to fund its military and economic needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the primary keeper for the Russian immobilised financial reserves.

A Clash Over Legality

European Union authorities have maintained that their plan is on solid legal ground. They argue rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in EU jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has called any utilization of the assets as theft. Authorities have threatened retaliatory actions, including confiscating EU corporate assets within Russia.

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

Wider Implications

With statements interpreted as an attempt to create division between Europe and the United States, the official described the assets plan as "a vicious attack on property rights and the international reserves system established by the United States."

The clearing house declined to comment on the latest legal action. The institution has previously noted it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are not expected to enforce rulings from Russian courts, analysts expect Moscow to pursue implementation in nations with stronger relations 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 assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are working on steps to deter other nations from assisting any Russian lawsuits against EU entities. They are also crafting safeguards to protect EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would solely be required to repay the money if and when Russia agreed to pay compensation for the immense damage inflicted during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This entails joint EU debt issuance to secure a loan, backed by unused funds within the European budget.

This alternative move, however, demands unanimity among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it sends a clear signal that when you do all this destruction to another nation, you must pay for the rebuilding."