🔗 Share this article

The Russian central bank has stated it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This action constitutes a clear response by the Kremlin regarding plans to use frozen Russian state funds to support Ukraine.

The Legal Claim

According to reports in Russian news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

European Union officials will decide in the coming days regarding a plan to leverage around €210 billion in immobilized Russian state funds. The proposal involves providing Ukraine with a large loan to fund its military and financial stability.

The vast majority of these funds, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the main custodian for the Russian immobilised financial reserves.

Divergent Legal Views

EU authorities have maintained that their proposal is legally sound. They argue rests on the principle that title of the sovereign wealth remains with Russia, even though it was frozen in European jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the funds as theft. Authorities have threatened reciprocal measures, including confiscating European corporate assets within Russia.

Kirill Dmitriev, a figure who has taken on a prominent position in diplomatic talks, wrote on X that Russia "will win in court" and regain its assets. He added that the EU, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a severe attack on property rights and the global financial system established by the United States."

Euroclear declined to comment on the new lawsuit. It has previously noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in European nations are unlikely to recognize judgments from Russian tribunals, experts anticipate Moscow to pursue implementation in nations with stronger ties to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant holdings can be identified," commented a lawyer from an NSP law firm.

European Safeguards

European authorities said they are developing steps to deter other nations from assisting any Russian lawsuits against EU entities. Additionally, they are crafting protections to protect EU member states with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would only be obligated to return the money in the event that Russia agreed to pay reparations for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for funding Ukraine. This entails joint EU borrowing to secure a loan, backed by unused funds within the EU budget.

Such a proposal, however, demands unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally important," she stated. "Furthermore, it sends a clear signal that if you cause all this damage to another country, you have to pay for the rebuilding."