🔗 Share this article

The Russian central bank has announced it is claiming compensation valued at $230 billion from the securities depository Euroclear. This move is a clear warning from the Kremlin against proposals to utilize immobilized Russian state funds to aid Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the monetary authority filed a claim last week for roughly 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

European Union officials will decide later this week on a proposal to leverage around €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a large loan to fund its defence and financial needs.

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the main keeper for the Russian frozen sovereign wealth.

A Clash Over Legality

EU officials have argued that their proposal is on solid legal ground. They argue is based on the principle that ownership of the sovereign wealth still belongs to Russia, despite being it was frozen in EU countries following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any utilization of the assets as theft. It has warned of reciprocal measures, such as confiscating EU corporate assets within Russia.

Kirill Dmitriev, a figure who has taken on a prominent position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its funds. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

With statements interpreted as an effort to create division between Europe and the United States, Dmitriev characterized the assets plan as "a vicious assault on the right to ownership and the international reserves system established by the United States."

Euroclear refused to comment on the latest legal action. The institution has previously noted it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are unlikely to recognize judgments from Russian tribunals, experts anticipate Moscow to pursue implementation in countries with closer ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such holdings can be identified," stated a lawyer from an NSP law firm.

European Safeguards

EU officials indicated they are developing measures to deter other countries from aiding any Russian lawsuits against European companies. Additionally, they are designing safeguards to shield EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay untouched.

Ukraine would only be required to return the money in the event that Russia agreed to pay compensation for the immense destruction inflicted during the nearly four-year war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for financing Ukraine. This entails joint EU debt issuance to secure a loan, using unallocated funds within the European budget.

Such a proposal, however, requires full agreement among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the most credible solution" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our public funds, which is also important," she remarked. "It also delivers a powerful signal that when you do all this destruction to another country, you must pay for the reparations."