🔗 Share this article

Russia's monetary authority has announced it is pursuing compensation valued at $230 billion from the securities depository Euroclear. This move is a clear response by the Kremlin against proposals to use frozen Russian state funds to aid Ukraine.

The Legal Claim

Based on accounts in local news outlets, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

European Union officials are set to decide later this week regarding a plan to use approximately €210 billion in immobilized Russian state funds. The proposal involves providing Ukraine with a large loan to finance its military and financial needs.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the main keeper for the Russian frozen sovereign wealth.

Dispute on Ownership

European Union authorities have maintained that their proposal is legally sound. They argue rests on the fact that ownership of the sovereign wealth remains with Russia, despite being it was frozen in European countries following the 2022 invasion of Ukraine.

Moscow, in contrast, has called any use of the assets as theft. It has threatened retaliatory actions, such as seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position 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.

Wider Implications

In comments seen as an attempt to drive a wedge between Europe and the United States, the official characterized the proposal as "a severe assault on the right to ownership and the global financial system created by the United States."

Euroclear refused to provide a statement on the latest lawsuit. The institution has previously stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are not expected to recognize judgments from Russian courts, analysts anticipate Moscow to seek enforcement in countries with stronger relations to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

EU officials indicated they are working on measures to discourage other nations from assisting any Russian lawsuits against EU companies. They are also designing protections to protect EU countries with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would provide an initial €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would stay unaffected.

Ukraine would solely be required to repay the loan if and when Russia consented to pay reparations for the vast destruction inflicted during the ongoing war.

Alternative Proposals

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

Such a proposal, however, requires unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also sends a clear message that if you do all this destruction to another nation, you have to pay for the rebuilding."