🔗 Share this article

Russia's monetary authority has declared it is claiming damages valued at $230 billion against the securities depository Euroclear. This action represents a direct response from the Kremlin regarding proposals to utilize immobilized Russian sovereign funds to support Ukraine.

The Financial Lawsuit

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

European Union officials will determine later this week regarding a proposal to use around €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a large loan to finance its military and financial needs.

Most of these funds, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their plan is on solid legal ground. They argue is based on the fact that title of the sovereign wealth remains with Russia, even though it was immobilized in European countries following the full-scale invasion of Ukraine.

The Russian government, however, has labeled any use of the funds as illegal appropriation. Authorities have threatened retaliatory measures, such as seizing EU corporate holdings within Russia.

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

Geopolitical Maneuvering

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

The clearing house declined to comment on the new lawsuit. The institution has previously noted it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in EU countries are unlikely to enforce judgments from Russian courts, experts expect Moscow to pursue implementation in countries with stronger ties to the Kremlin.

"The Bank of Russia may attempt 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 identified," commented a legal expert from an NSP law firm.

European Safeguards

EU officials indicated they are working on measures to discourage other nations from assisting any Russian lawsuits against European entities. Additionally, they are crafting protections to shield EU countries with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain unaffected.

Ukraine would solely be required to repay the money if and when Russia agreed to pay compensation for the immense destruction caused during the ongoing war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for financing Ukraine. This entails common EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it sends a powerful signal that when you do all this damage to another nation, you have to pay for the reparations."