🔗 Share this article

Russia's monetary authority has announced it is claiming compensation totaling $230 billion against the financial institution Euroclear. This legal step is a clear response by the Kremlin against plans to utilize immobilized Russian sovereign assets to support Ukraine.

The Legal Claim

Based on accounts in Russian news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

EU leaders will determine in the coming days regarding a plan to use approximately €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a substantial loan to fund its military and economic stability.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution serves as the primary keeper for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

European Union officials have maintained that their proposal is on solid legal ground. Their position rests on the principle that ownership of the sovereign wealth still belongs to Russia, despite being it was frozen in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as illegal appropriation. Authorities have warned of reciprocal measures, such as seizing European private investors' holdings within Russia.

Kirill Dmitriev, who has assumed a prominent position in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

In comments interpreted as an effort 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 established by the United States."

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

Legal Hurdles Ahead

While judges in EU countries are not expected to enforce rulings from Russian tribunals, experts expect Moscow to seek 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 jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such assets can be identified," stated a legal expert from an NSP law firm.

European Safeguards

European authorities indicated they are working on steps to deter other nations from aiding any Russian lawsuits against EU companies. Additionally, they are designing safeguards to protect EU member states with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Ukraine would only be required to repay the loan in the event that Russia agreed to pay reparations for the immense destruction caused during the ongoing conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for financing Ukraine. This entails joint EU debt issuance to fund a loan, backed by unused funds within the EU budget.

This alternative move, however, requires unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, a senior official, described the reparations loan 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 remarked. "Furthermore, it delivers a clear message that when you do all this destruction to another country, you must pay for the reparations."