🔗 Share this article

Russia's monetary authority has announced it is claiming damages amounting to $230 billion from the financial institution Euroclear. This action represents a clear response by the Kremlin regarding proposals to use frozen Russian state assets to support Ukraine.

The Substantial Demand

Based on reports in Russian state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

European Union officials will decide later this week regarding a plan to leverage approximately €210 billion in frozen Russian state funds. This scheme entails granting Ukraine with a large loan to finance its defence and economic needs.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Kremlin's frozen sovereign wealth.

Divergent Legal Views

EU authorities have argued that their plan is legally sound. They argue is based on the principle that ownership of the sovereign wealth remains with Russia, even though it was frozen in EU countries shortly after the full-scale invasion of Ukraine.

Moscow, however, has labeled any utilization of the assets as illegal appropriation. It has warned of retaliatory measures, including seizing EU private investors' holdings within Russia.

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

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a vicious assault on property rights and the international reserves system created by the United States."

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

Legal Hurdles Ahead

While courts in EU countries are unlikely to enforce rulings from Russian courts, experts expect Moscow to seek implementation in countries with closer relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be located," commented a legal expert from an NSP law firm.

European Safeguards

European authorities said they are working on steps to deter other nations from assisting any Russian lawsuits against EU companies. Additionally, they are designing safeguards to shield EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would only be required to repay the money in the event that Russia agreed to pay compensation for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

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

This alternative move, nevertheless, requires full agreement 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, described the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally important," she stated. "Furthermore, it sends a powerful signal that when you do all this damage to another nation, you must pay for the rebuilding."