🔗 Share this article

Russia's monetary authority has announced it is pursuing compensation totaling $230 billion against the securities depository Euroclear. This legal step is a clear response from the Kremlin against proposals to utilize immobilized Russian state assets to aid Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the central bank initiated a claim last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

EU leaders are set to decide in the coming days on a plan to leverage around €210 billion in immobilized Russian assets. This scheme entails providing Ukraine with a substantial loan to finance its defence and economic stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Kremlin's immobilised financial reserves.

A Clash Over Legality

EU officials have argued that their proposal is on solid legal ground. They argue rests on the principle that ownership of the sovereign wealth remains with Russia, despite being it was frozen in European countries shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the assets as illegal appropriation. Authorities have threatened reciprocal actions, such as seizing EU corporate holdings 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 warned that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments interpreted as an effort to drive a wedge between Europe and the United States, the official characterized the assets plan as "a vicious attack on the right to ownership and the international reserves system created by the United States."

The clearing house refused to comment on the latest legal action. It has in the past stated it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in European nations are not expected to enforce judgments from Russian tribunals, experts anticipate Moscow to pursue enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant assets can be identified," stated a lawyer from an NSP law firm.

European Safeguards

European authorities indicated they are developing measures to discourage other countries from aiding any Russian lawsuits against EU entities. Additionally, they are crafting protections to shield EU countries with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain untouched.

Ukraine would only be required to repay the loan if and when Russia agreed to pay compensation for the immense damage caused during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for funding Ukraine. This entails common EU borrowing to secure a loan, using unused funds within the European budget.

Such a proposal, nevertheless, requires full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally significant," she stated. "It also sends a powerful signal that when you do all this damage to another nation, you must pay for the rebuilding."