🔗 Share this article

The Russian central bank has announced it is claiming damages amounting to $230 billion from the securities depository Euroclear. This action represents a direct response by the Kremlin regarding proposals to utilize frozen Russian sovereign assets to aid 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 sum is equivalent to the stated $230 billion demand.

European Union officials are set to decide later this week on a proposal to leverage around €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a substantial loan to fund its military and economic needs.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the main custodian for the Kremlin's frozen financial reserves.

A Clash Over Legality

EU authorities have maintained that their plan is legally sound. They argue rests on the principle that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU countries shortly after the full-scale military offensive of Ukraine.

Moscow, however, has called any utilization of the funds as illegal appropriation. Authorities have warned of retaliatory measures, such as confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key position in diplomatic talks, stated on X that Russia "will prevail in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

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

Euroclear declined to comment on the new lawsuit. The institution has previously stated it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are not expected to recognize judgments from Russian tribunals, analysts expect Moscow to pursue implementation in countries with closer relations to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such holdings can be located," commented a lawyer from an international firm.

EU Countermeasures

EU officials said they are working on measures to deter other nations from assisting any Russian lawsuits against European entities. They are also crafting safeguards to shield EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain unaffected.

Kyiv would only be obligated to return the money in the event that Russia consented to pay reparations for the vast destruction caused during the ongoing war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for funding Ukraine. This involves joint EU debt issuance to fund a loan, using unallocated funds within the EU budget.

Such a proposal, nevertheless, requires full agreement among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, a senior official, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also significant," she remarked. "Furthermore, it delivers a powerful signal that if you cause all this damage to another nation, you must pay for the reparations."