🔗 Share this article

Russia's monetary authority has announced it is pursuing damages totaling $230 billion from the securities depository Euroclear. This action is a clear response from the Kremlin against proposals to use immobilized Russian state funds to aid Ukraine.

The Financial Lawsuit

According to accounts in local news outlets, the central bank initiated a claim last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

EU leaders are set to determine in the coming days regarding a plan to use approximately €210 billion in immobilized Russian state funds. This scheme involves providing Ukraine with a large loan to fund its military and economic needs.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the primary keeper for the Russian frozen financial reserves.

Dispute on Ownership

EU officials have argued that their proposal is on solid legal ground. Their position rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU jurisdictions shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any utilization of the assets as theft. It has warned of retaliatory measures, such as seizing European corporate assets within Russia.

Kirill Dmitriev, a figure who has assumed a key position in peace negotiations, wrote on X that Russia "will win in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a severe attack on property rights and the global financial system established by the United States."

Euroclear refused to provide a statement on the latest legal action. It has previously stated it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are unlikely to enforce judgments from Russian tribunals, analysts anticipate Moscow to pursue implementation in countries with closer relations 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 sympathetic nations, if relevant holdings can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are developing steps to discourage other countries from assisting any Russian legal action against EU entities. Additionally, they are crafting safeguards to protect EU countries with assets in Russia from what they call "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 frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would solely be obligated to return the money if and when Russia consented to pay reparations for the vast destruction inflicted during the nearly four-year war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves common EU debt issuance to fund a loan, using unallocated funds within the EU budget.

This alternative move, nevertheless, demands full agreement among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our public funds, which is equally important," she stated. "Furthermore, it sends a clear signal that if you do all this damage to another country, you have to pay for the rebuilding."