🔗 Share this article

Russia's monetary authority has declared it is seeking compensation amounting to $230 billion from the financial institution Euroclear. This action is a clear response by the Kremlin against proposals to use frozen Russian sovereign funds to aid Ukraine.

The Financial Lawsuit

Based on accounts in Russian state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials will decide in the coming days on a plan to leverage around €210 billion in immobilized Russian assets. The proposal involves providing Ukraine with a substantial loan to fund its defence and economic needs.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Russian immobilised financial reserves.

A Clash Over Legality

EU authorities have maintained that their plan is on solid legal ground. Their position rests on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in European countries shortly after the 2022 invasion of Ukraine.

Moscow, however, has called any use of the funds as theft. It has warned of retaliatory actions, including seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a severe assault on the right to ownership and the international reserves system created by the United States."

Euroclear refused to provide a statement on the latest lawsuit. It has previously stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are unlikely to enforce rulings from Russian tribunals, experts expect Moscow to seek implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such holdings can be identified," commented a lawyer from an NSP law firm.

European Safeguards

EU officials said they are developing steps to discourage other countries from aiding any Russian lawsuits against European entities. They are also designing safeguards to protect EU member states with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would solely be obligated to repay the loan if and when Russia consented to pay compensation for the immense destruction caused during the ongoing conflict.

Alternative Proposals

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

Such a proposal, however, demands unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also significant," she remarked. "It also delivers a powerful signal that if you cause all this destruction to another nation, you must pay for the rebuilding."