🔗 Share this article

The Russian central bank has announced it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This action is a clear warning by the Kremlin regarding plans to utilize frozen Russian state funds to support Ukraine.

The Legal Claim

According to reports in local news outlets, the central bank initiated a claim last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders will determine later this week regarding a plan to leverage approximately €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a substantial loan to finance its military and economic needs.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the main keeper for the Russian frozen sovereign wealth.

Divergent Legal Views

EU officials have argued that their proposal is legally sound. Their position is based on the fact that ownership of the sovereign wealth remains with Russia, even though it was frozen in EU jurisdictions following the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the funds as theft. Authorities have warned of reciprocal measures, such as confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent role in peace negotiations, wrote on X that Russia "will prevail in court" and retrieve its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious attack on the right to ownership and the global financial system established by the United States."

The clearing house refused to comment on the latest lawsuit. It has in the past stated it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are unlikely to recognize rulings from Russian tribunals, analysts anticipate Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be identified," commented a lawyer from an NSP law firm.

EU Countermeasures

EU officials indicated they are working on measures to discourage other nations from aiding any Russian legal action against EU companies. Additionally, they are designing safeguards to shield EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the complex plan, the EU would issue an first €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would stay untouched.

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

Alternative Proposals

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

This alternative move, however, demands unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the most credible solution" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also significant," she remarked. "Furthermore, it delivers a powerful message that if you do all this damage to another nation, you must pay for the rebuilding."