🔗 Share this article

Russia's monetary authority has declared it is pursuing damages totaling $230 billion from the securities depository Euroclear. This move represents a clear response from the Kremlin regarding plans to utilize frozen Russian state funds to support Ukraine.

The Substantial Demand

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

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

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

European Union officials have maintained that their proposal is legally sound. They argue rests on the principle that title of the sovereign wealth still belongs to Russia, even though it was immobilized in European countries following the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any use of the funds as illegal appropriation. It has warned of retaliatory measures, such as confiscating European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure 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 assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious attack 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. The institution has in the past noted it is contending with over 100 legal cases in Russian courts.

Enforcement Challenges

Although judges in EU countries are unlikely to recognize judgments from Russian courts, analysts anticipate Moscow to seek enforcement in nations with closer ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such holdings can be located," stated a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are developing steps to deter other countries from aiding any Russian legal action against EU companies. They are also crafting safeguards to shield EU countries with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex scheme, the EU would issue an initial €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay untouched.

Kyiv would only be required to repay the loan if and when Russia consented to pay reparations for the immense damage inflicted during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for funding Ukraine. This involves common EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, nevertheless, requires full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, a senior official, described the reparations loan as "the strongest option" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is equally important," she remarked. "Furthermore, it delivers a powerful message that when you do all this destruction to another country, you must pay for the reparations."