🔗 Share this article

The Russian central bank has announced it is claiming compensation amounting to $230 billion against the securities depository Euroclear. This move constitutes a direct response from the Kremlin regarding plans to use frozen Russian state funds to support Ukraine.

The Financial Lawsuit

According to reports in Russian news outlets, the central bank filed a claim last week for approximately 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

European Union officials are set to decide in the coming days on a proposal to leverage around €210 billion in immobilized Russian assets. This scheme entails providing Ukraine with a large loan to finance its military and financial stability.

Most of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Kremlin's frozen sovereign wealth.

Divergent Legal Views

EU authorities have argued that their proposal is on solid legal ground. Their position is based on the fact that title of the sovereign wealth still belongs to Russia, even though it was frozen in EU countries following the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any utilization of the funds as theft. Authorities have threatened retaliatory measures, such as confiscating European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its funds. He added that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

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

Euroclear declined to comment on the new lawsuit. It has previously noted it is contending with more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While courts in European nations are unlikely to recognize rulings from Russian tribunals, analysts expect Moscow to seek enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such assets can be located," stated a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are developing steps to deter other nations from assisting any Russian legal action against European entities. Additionally, they are crafting protections to protect EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the complex plan, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would only be required to repay the money if and when Russia consented to pay compensation for the vast damage inflicted during the ongoing conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for financing Ukraine. This entails common EU debt issuance to secure a loan, using unallocated funds within the EU budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest option" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is also significant," she stated. "Furthermore, it delivers a clear message that when you do all this destruction to another nation, you have to pay for the rebuilding."