🔗 Share this article

Russia's monetary authority has stated it is seeking compensation amounting to $230 billion against the securities depository Euroclear. This move represents a direct warning from the Kremlin regarding plans to use frozen Russian sovereign funds to aid Ukraine.

The Financial Lawsuit

According to reports in local state media, the monetary authority filed a claim last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

EU leaders will determine in the coming days on a proposal to leverage around €210 billion in frozen Russian assets. The proposal involves providing Ukraine with a substantial loan to fund its defence and financial stability.

The vast majority of these funds, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the primary keeper for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

EU authorities have argued that their proposal is on solid legal ground. Their position is based on the principle that ownership of the state assets remains with Russia, even though it was frozen in EU countries shortly after the full-scale invasion of Ukraine.

Moscow, however, has labeled any utilization of the assets as theft. It has warned of reciprocal measures, such as confiscating EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in diplomatic talks, stated on X that Russia "will win in court" and regain its assets. He added that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a vicious assault on property rights and the international reserves system established by the United States."

The clearing house declined to comment on the latest lawsuit. The institution has previously stated it is facing more than 100 legal cases in Russian courts.

Enforcement Challenges

While judges in European nations are unlikely to enforce judgments from Russian courts, experts expect Moscow to seek implementation in nations with stronger ties to the Kremlin.

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

European Safeguards

European authorities indicated they are working on steps to deter other nations from aiding any Russian lawsuits against EU entities. Additionally, they are designing protections to shield EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Ukraine would only be required to repay the loan if and when Russia agreed to pay compensation for the immense damage caused during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This involves common EU borrowing to fund a loan, using unused funds within the European budget.

Such a proposal, however, requires full agreement among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally significant," she stated. "Furthermore, it delivers a clear signal that if you cause all this damage to another country, you have to pay for the reparations."