🔗 Share this article

The Russian central bank has declared it is claiming compensation amounting to $230 billion from the securities depository Euroclear. This legal step represents a clear warning by the Kremlin against proposals to utilize immobilized Russian state funds to support Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

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

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

Dispute on Ownership

EU authorities have argued that their proposal is on solid legal ground. Their position rests on the fact that title of the state assets remains with Russia, despite being it was frozen in EU jurisdictions following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as theft. It has threatened retaliatory actions, such as confiscating EU private investors' assets within Russia.

Kirill Dmitriev, who has assumed a key position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

In comments interpreted as an effort to create division between Europe and the United States, the official described the proposal as "a severe assault on property rights and the global financial system created by the United States."

The clearing house declined to comment on the latest legal action. It has previously stated it is contending with over 100 lawsuits in Russian courts.

Enforcement Challenges

While judges in European nations are unlikely to recognize rulings from Russian courts, experts anticipate Moscow to seek implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such holdings can be identified," commented a legal expert from an NSP law firm.

European Safeguards

European authorities said they are working on measures to deter other nations from aiding any Russian legal action against EU companies. They are also designing safeguards to shield EU countries with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

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

Kyiv would only be obligated to return the money in the event that Russia consented to pay reparations for the immense damage caused during the ongoing war.

Alternative Proposals

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

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

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also important," she stated. "It also delivers a powerful message that when you do all this damage to another country, you must pay for the reparations."