🔗 Share this article

The Russian central bank has announced it is claiming damages amounting to $230 billion against the securities depository Euroclear. This move constitutes a clear response by the Kremlin regarding plans to use immobilized Russian state assets to aid Ukraine.

The Legal Claim

According to reports in local news outlets, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

European Union officials will determine later this week regarding a proposal to use approximately €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a substantial loan to fund its defence and financial stability.

Most of these funds, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

EU authorities have maintained that their plan is on solid legal ground. Their position rests on the fact that title of the state assets still belongs to Russia, even though it was frozen in European jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any utilization of the funds as theft. It has warned of reciprocal measures, such as confiscating EU private investors' holdings within Russia.

Kirill Dmitriev, who has assumed a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements seen as an effort to create division between Europe and the United States, the official described the assets plan as "a vicious attack on property rights and the international reserves system created by the United States."

The clearing house declined to comment on the latest legal action. The institution has in the past stated it is facing over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in European nations are unlikely to enforce judgments from Russian tribunals, experts expect Moscow to seek enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be located," commented a lawyer from an NSP law firm.

European Safeguards

EU officials indicated they are developing measures to discourage other countries from assisting any Russian lawsuits against EU entities. Additionally, they are designing protections to protect EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain unaffected.

Kyiv would only be obligated to repay the money if and when Russia agreed to pay reparations for the vast damage inflicted during the nearly four-year war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for funding Ukraine. This entails common EU borrowing to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, however, demands unanimity among all 27 member states. Hungary's government, considered aligned with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also important," she remarked. "Furthermore, it sends a clear message that when you cause all this damage to another nation, you have to pay for the reparations."