🔗 Share this article

Russia's monetary authority has stated it is seeking damages totaling $230 billion from the securities depository Euroclear. This action is a direct response from the Kremlin regarding proposals to use frozen Russian sovereign assets to support Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

EU leaders are set to decide later this week regarding a proposal to use approximately €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a substantial loan to fund its defence and financial needs.

The vast majority of these funds, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear serves as the primary keeper for the Russian immobilised sovereign wealth.

Divergent Legal Views

EU officials have maintained that their plan is on solid legal ground. Their position is based on the fact that title of the state assets remains with Russia, despite being it was frozen in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has called any use of the assets as theft. Authorities have threatened retaliatory actions, such as confiscating EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

In comments seen as an attempt to create division between Europe and the United States, the official characterized the assets plan as "a vicious attack on property rights and the international reserves 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 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in EU countries are unlikely to recognize judgments from Russian courts, experts anticipate Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant holdings can be located," commented a lawyer from an NSP law firm.

European Safeguards

European authorities said they are developing steps to discourage other countries from aiding any Russian lawsuits against European companies. They are also crafting safeguards to protect EU countries with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain untouched.

Ukraine would only be obligated to return the money if and when Russia consented to pay compensation for the immense damage caused during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves common EU borrowing to fund a loan, backed by unused funds within the EU budget.

Such a proposal, nevertheless, requires unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also important," she stated. "It also sends a clear signal that if you cause all this damage to another nation, you have to pay for the reparations."