🔗 Share this article

The Russian central bank has announced it is pursuing compensation valued at $230 billion from the securities depository Euroclear. This move constitutes a direct warning by the Kremlin regarding plans to use immobilized Russian sovereign assets to aid Ukraine.

The Legal Claim

According to accounts in Russian state media, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This figure corresponds to the aforementioned $230 billion demand.

European Union officials will determine in the coming days regarding a proposal to leverage around €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a substantial loan to finance its military and economic stability.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the main custodian for the Russian immobilised sovereign wealth.

Divergent Legal Views

EU officials have maintained that their plan is legally sound. Their position is based on the fact that ownership of the state assets still belongs to Russia, despite being it was frozen in European jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has labeled any utilization of the assets as theft. Authorities have warned of reciprocal measures, such as seizing European private investors' holdings within Russia.

Kirill Dmitriev, a figure who has assumed a prominent role in peace negotiations, wrote on X that Russia "will prevail in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

In comments seen as an attempt to drive a wedge between Europe and the United States, the official characterized the assets plan as "a vicious attack on property rights and the global financial system established by the United States."

Euroclear refused to provide a statement on the new legal action. The institution has in the past noted it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize rulings from Russian tribunals, analysts anticipate Moscow to pursue implementation in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such assets can be identified," commented a lawyer from an NSP law firm.

European Safeguards

EU officials said they are working on steps to discourage other nations from aiding any Russian lawsuits against European companies. Additionally, they are designing protections to protect EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

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

Kyiv would only be required to return the money in the event that Russia agreed to pay compensation for the immense damage caused during the nearly four-year conflict.

Alternative Proposals

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

Such a proposal, nevertheless, requires unanimity among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also important," she stated. "It also sends a clear signal that if you cause all this damage to another nation, you must pay for the reparations."