🔗 Share this article

Russia's monetary authority has announced it is claiming damages amounting to $230 billion from the financial institution Euroclear. This legal step represents a direct response by the Kremlin against proposals to use frozen Russian sovereign assets to support Ukraine.

The Legal Claim

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

European Union officials are set to decide in the coming days regarding a proposal to leverage around €210 billion in frozen Russian assets. The proposal involves granting Ukraine with a large loan to fund its defence and economic needs.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the primary keeper for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their plan is legally sound. They argue is based on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU countries shortly after the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the funds as theft. It has threatened retaliatory actions, including seizing European private investors' assets within Russia.

Kirill Dmitriev, a figure who has assumed a key role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Wider Implications

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a severe assault on property rights and the international reserves system established by the United States."

The clearing house refused to provide a statement on the latest lawsuit. It has in the past stated it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in EU countries are unlikely to recognize rulings from Russian tribunals, analysts anticipate Moscow to seek enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to discourage other countries from aiding any Russian legal action against European entities. Additionally, they are designing safeguards to shield EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would only be required to return the money if and when Russia agreed to pay reparations for the vast damage caused during the ongoing conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for financing Ukraine. This involves joint EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, nevertheless, requires full agreement among all 27 member states. Hungary's government, considered friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our public funds, which is equally important," she stated. "It also sends a powerful message that if you cause all this damage to another nation, you must pay for the reparations."