🔗 Share this article

Russia's monetary authority has announced it is seeking damages amounting to $230 billion against the financial institution Euroclear. This action is a direct warning by the Kremlin regarding plans to utilize immobilized Russian state assets to aid Ukraine.

The Substantial Demand

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

European Union officials will decide later this week regarding a proposal to use around €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a substantial loan to finance its defence and financial needs.

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.

Dispute on Ownership

EU officials have maintained that their plan is on solid legal ground. Their position rests on the fact that ownership of the state assets still belongs to Russia, despite being it was frozen in EU countries following the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as illegal appropriation. It has warned of retaliatory actions, including confiscating European private investors' holdings within Russia.

Kirill Dmitriev, a figure who has assumed a key position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe attack on property rights and the global financial system created by the United States."

Euroclear declined to provide a statement on the new lawsuit. The institution has in the past noted it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are not expected to enforce rulings from Russian tribunals, analysts anticipate Moscow to pursue enforcement in nations with closer relations to the Kremlin.

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

EU Countermeasures

EU officials indicated they are developing steps to discourage other countries from assisting any Russian lawsuits against EU entities. They are also crafting protections to shield EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain untouched.

Ukraine would only be required to repay the loan in the event that Russia agreed to pay compensation for the immense destruction inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This entails common EU borrowing to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, however, demands full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our public funds, which is equally significant," she stated. "It also delivers a clear signal that if you cause all this damage to another country, you have to pay for the reparations."