🔗 Share this article

The Russian central bank has declared it is seeking compensation valued at $230 billion against the securities depository Euroclear. This move is a direct response by the Kremlin against plans to use frozen Russian sovereign funds to support Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

EU leaders are set to decide in the coming days on a plan to use around €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a substantial loan to finance its defence and economic stability.

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the main keeper for the Kremlin's frozen financial reserves.

Divergent Legal Views

EU officials have maintained that their plan is on solid legal ground. Their position rests on the principle that title of the state assets still belongs to Russia, despite being it was immobilized in EU jurisdictions following the 2022 military offensive of Ukraine.

Moscow, in contrast, has called any utilization of the funds as theft. It has warned of reciprocal measures, including confiscating EU corporate holdings within Russia.

Kirill Dmitriev, who has assumed a prominent role 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 euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

With statements seen as an attempt to drive a wedge between Europe and the United States, the official characterized the proposal as "a severe attack on property rights and the global financial system established by the United States."

The clearing house declined to provide a statement on the new legal action. It has previously stated it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

Although judges in European nations are not expected to enforce judgments from Russian tribunals, analysts anticipate Moscow to pursue enforcement in nations with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant holdings can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

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

How the Funding Would Work

Under the detailed plan, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain untouched.

Kyiv would only be required to repay the loan in the event that Russia consented to pay compensation for the vast damage caused during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for funding Ukraine. This entails joint EU debt issuance to secure a loan, backed by unused funds within the EU budget.

Such a proposal, nevertheless, requires unanimity among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our public funds, which is also significant," she stated. "It also delivers a powerful message that if you cause all this damage to another country, you must pay for the reparations."