🔗 Share this article

The Russian central bank has declared it is pursuing compensation amounting to $230 billion from the financial institution Euroclear. This action represents a direct response from the Kremlin regarding plans to use frozen Russian state assets to support Ukraine.

The Financial Lawsuit

Based on reports in Russian news outlets, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This figure corresponds to the aforementioned $230 billion demand.

EU leaders are set to decide later this week regarding a plan to use around €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a large loan to finance its defence and financial stability.

Most of these funds, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the main custodian for the Russian immobilised sovereign wealth.

A Clash Over Legality

European Union officials have argued that their proposal is on solid legal ground. They argue rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU countries shortly after the full-scale military offensive of Ukraine.

Moscow, however, has labeled any utilization of the funds as illegal appropriation. Authorities have threatened retaliatory measures, including confiscating European private investors' assets within Russia.

Kirill Dmitriev, who has taken on a prominent position in peace negotiations, stated on X that Russia "will win in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on property rights and the international reserves system created by the United States."

Euroclear declined to comment on the latest legal action. The institution has previously noted it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are not expected to recognize judgments from Russian courts, analysts anticipate Moscow to seek enforcement in countries with closer relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such assets can be located," stated a legal expert from an NSP law firm.

European Safeguards

EU officials indicated they are developing steps to discourage other countries from assisting any Russian lawsuits against EU entities. They are also designing safeguards to shield EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would solely be obligated to repay the money if and when Russia agreed to pay compensation for the immense destruction inflicted during the ongoing conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for funding Ukraine. This entails joint EU debt issuance to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, however, demands full agreement among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also important," she stated. "Furthermore, it delivers a clear signal that when you cause all this damage to another nation, you have to pay for the rebuilding."