🔗 Share this article

The Russian central bank has declared it is claiming damages valued at $230 billion against the securities depository Euroclear. This action constitutes a clear warning from the Kremlin against proposals to use frozen Russian sovereign funds to support Ukraine.

The Substantial Demand

According to reports in local news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

EU leaders are set to determine in the coming days on a plan to use around €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a large loan to finance its defence and economic needs.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the main custodian for the Kremlin's frozen sovereign wealth.

Divergent Legal Views

EU officials have argued that their proposal is legally sound. They argue rests on the principle that ownership of the state assets still belongs to Russia, even though it was frozen in European jurisdictions following the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any utilization of the funds as illegal appropriation. It has threatened reciprocal actions, including seizing EU private investors' assets within Russia.

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

Geopolitical Maneuvering

With statements interpreted as an attempt to drive a wedge between Europe and the United States, the official characterized the proposal as "a severe assault on the right to ownership and the global financial system established by the United States."

The clearing house declined to comment on the new legal action. 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, experts anticipate Moscow to pursue implementation in countries with closer relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant holdings can be identified," commented a legal expert from an international firm.

European Safeguards

EU officials said they are developing measures to discourage other nations from assisting any Russian legal action against European entities. Additionally, they are designing protections to shield EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would issue 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 stay untouched.

Kyiv would solely be obligated to repay the money in the event that Russia agreed to pay compensation for the vast damage inflicted during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for financing Ukraine. This entails joint EU borrowing to fund a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, 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 top diplomat, a senior official, described the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it sends a powerful signal that if you do all this damage to another country, you must pay for the reparations."