🔗 Share this article

Russia's monetary authority has stated it is pursuing compensation valued at $230 billion from the financial institution Euroclear. This move is a clear response by the Kremlin against proposals to utilize frozen Russian sovereign assets to support Ukraine.

The Financial Lawsuit

Based on accounts in Russian state media, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials are set to decide later this week regarding a proposal to use approximately €210 billion in immobilized Russian state funds. This scheme entails granting Ukraine with a large loan to fund its defence 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 primary keeper for the Russian immobilised financial reserves.

Divergent Legal Views

EU officials have argued that their proposal is legally sound. They argue is based on the fact that ownership of the state assets still belongs to Russia, even though it was immobilized in European jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has called any use of the assets as illegal appropriation. It has warned of reciprocal actions, including confiscating European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a severe attack on property rights and the international reserves system created by the United States."

Euroclear refused to comment on the new legal action. It has previously stated it is facing over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are not expected to recognize rulings from Russian courts, experts expect Moscow to seek enforcement 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 nations, provided that relevant assets can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials indicated they are developing steps to discourage other countries from aiding any Russian legal action against European companies. They are also designing safeguards to shield EU member states with assets in Russia from what they term "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 earned from the immobilized assets at Euroclear. Critically, 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 compensation for the vast destruction caused during the nearly four-year war.

Alternative Proposals

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

This alternative move, nevertheless, requires unanimity among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also important," she remarked. "Furthermore, it sends a clear signal that if you do all this damage to another nation, you have to pay for the rebuilding."