🔗 Share this article

The Russian central bank has announced it is claiming compensation totaling $230 billion from the securities depository Euroclear. This action is a direct warning by the Kremlin against plans to utilize immobilized Russian state funds to support Ukraine.

The Legal Claim

Based on reports in local state media, the central bank filed a claim last week for approximately 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

EU leaders are set to determine in the coming days on a proposal to use around €210 billion in frozen Russian assets. The proposal entails providing Ukraine with a substantial loan to fund its military and economic stability.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the main custodian for the Russian frozen sovereign wealth.

Dispute on Ownership

European Union authorities have maintained that their plan is legally sound. Their position rests on the principle that title of the sovereign wealth remains with 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 assets as illegal appropriation. It has threatened retaliatory measures, including confiscating European private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a prominent role in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

With statements interpreted as an attempt to drive a wedge between Europe and the United States, the official characterized the assets plan as "a vicious assault on property rights and the global financial system created by the United States."

The clearing house refused to provide a statement on the new legal action. The institution has previously noted it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are unlikely to recognize rulings from Russian courts, experts anticipate Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement 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 NSP law firm.

European Safeguards

European authorities said they are working on steps to discourage other countries from aiding any Russian lawsuits against European companies. Additionally, they are designing protections to shield EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

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

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

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for financing Ukraine. This involves joint EU borrowing to secure a loan, using unused funds within the EU budget.

This alternative move, however, demands unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is equally important," she remarked. "Furthermore, it sends a clear signal that when you do all this damage to another nation, you have to pay for the reparations."