🔗 Share this article

Russia's monetary authority has announced it is claiming damages amounting to $230 billion against the financial institution Euroclear. This legal step constitutes a direct warning by the Kremlin against proposals to use frozen Russian sovereign assets to support Ukraine.

The Legal Claim

Based on reports in Russian news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

European Union officials are set to determine in the coming days regarding a proposal to leverage approximately €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a large loan to finance its defence and financial stability.

Most of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Kremlin's frozen financial reserves.

A Clash Over Legality

European Union officials have maintained that their plan is on solid legal ground. Their position is based on the principle that title of the state assets remains with Russia, even though it was immobilized in European jurisdictions following the full-scale military offensive of Ukraine.

Moscow, however, has called any utilization of the assets as illegal appropriation. Authorities have warned of reciprocal actions, such as seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role 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 face consequences" from the proposal.

Wider Implications

With statements seen as an attempt to create division between Europe and the United States, the official described the assets plan as "a vicious assault on the right to ownership and the international reserves system created by the United States."

Euroclear refused to provide a statement on the new lawsuit. It has previously stated it is contending with over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in European nations are unlikely to recognize judgments from Russian tribunals, analysts expect Moscow to seek enforcement in countries with closer relations to the Kremlin.

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

European Safeguards

European authorities indicated they are working on measures to deter other nations from assisting any Russian lawsuits against European companies. Additionally, they are crafting protections to shield EU member states with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the detailed plan, the EU would provide an first €90 billion loan to Ukraine, using 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 required to return the loan if and when Russia agreed to pay compensation for the immense destruction caused during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This entails common EU debt issuance to secure a loan, using unused funds within the EU budget.

Such a proposal, however, requires unanimity among all 27 member states. Hungary's government, considered aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also significant," she remarked. "Furthermore, it sends a powerful message that when you cause all this damage to another country, you must pay for the reparations."