🔗 Share this article

The Russian central bank has announced it is pursuing damages totaling $230 billion from the securities depository Euroclear. This legal step represents a clear response by the Kremlin regarding proposals to use immobilized Russian sovereign funds to support Ukraine.

The Substantial Demand

According to reports in local state media, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

European Union officials are set to determine in the coming days regarding a proposal to use around €210 billion in immobilized Russian state funds. This scheme involves providing Ukraine with a large loan to fund its defence and financial stability.

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

A Clash Over Legality

European Union officials have maintained that their proposal is legally sound. They argue is based on the fact that ownership of the state assets remains with Russia, even though it was frozen in European countries following the 2022 invasion of Ukraine.

Moscow, however, has called any use of the assets as theft. It has threatened retaliatory actions, such as seizing European corporate holdings within Russia.

Kirill Dmitriev, who has taken on a prominent role in peace negotiations, stated on a social media platform that Russia "will win in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious assault on the right to ownership and the global financial system created by the United States."

The clearing house refused to comment on the new lawsuit. The institution has in the past stated it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in EU countries are not expected to recognize rulings from Russian courts, experts anticipate Moscow to seek enforcement in nations with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such assets can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are working on measures to deter other countries from aiding any Russian legal action against EU companies. They are also crafting protections to shield EU member states with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would only be obligated to repay the money in the event that Russia consented to pay reparations for the vast destruction inflicted during the nearly four-year war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for financing Ukraine. This involves joint EU borrowing to fund a loan, using unused funds within the EU budget.

Such a proposal, nevertheless, requires unanimity among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest 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 equally significant," she remarked. "Furthermore, it delivers a powerful message that if you cause all this damage to another nation, you must pay for the rebuilding."